Q:

Subject: Estate Tax Exclusion

Mr. Kerstetter,
I found your writeup on estate and gift taxes via google search, and then I read your blog with great interest.
Thank you for publlishing it.
 
You have this text on your page:

If you do give any one person more than the $13,000 during a single calendar year, you must file a 709 and either pay gift tax or use part of your lifetime exclusion.  When you pass away, the amount of exclusion that will be available on your estate tax return (706) will be whatever the exclusion is at that time reduced by the gifts you reported on 709s during your lifetime, where you opted to offset them with part of your lifetime exclusion.  If you never used any of the credit by keeping your gifts below the annual limits, the full amount of the credit will be available to your estate

My wife and I have six children, so we're trying to get some intelligent estate planning done. The lifetime exclusion I understand is now $3.5M.  Is this $3.5M total for the estate, or $3.5M for each heir?
 
Thanks for your help.

A:

I have a chart of the annual estate tax exclusions on my website.  

For people passing away in 2009, there is an exclusion of $3.5 million of net estate value per decedent.

The lifetime exclusion on gifts is set at one million dollars.

You should be working with an estate planning professional because there are a lot of changes on the horizon; so you want to make sure any plan you set up is flexible enough to be able to handle the changes.

Good luck.

Kerry Kerstetter

Labels: Estates, Gifting

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 11/21/2009 07:26:00 PM Send this post:

Spend It in Vegas or Die Paying Taxes – The long awaited year of zero Estate (aka Death) Tax may not come true if a certain Marxist president has his way.  As this article points out, that means much more money for those of us in the business of helping people legally avoid that kind of confiscation.

Labels: Estates

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 4/02/2009 10:21:00 PM Send this post:

Q:

Subject:  Lifetime exclusion for gift taxes?

Dear Tax Guru,
 
On your website you say that the lifetime exclusion for gift taxes is 1 million dollars. My tax accountant in California says that the IRS publications say that it is 1 million dollars for estate taxes but $385,000 for gift taxes.
Can you enlighten me on this matter.
Thank you,

A:

Your accountant is obviously using reference materials that are seriously out of date.  That is very scary in the ever changing world of taxes to think that a tax guide from at least five years ago is still relevant today.

You can see the exemption amounts on my website.   

You can also download the IRS's forms and instructions from the IRS website.  

Good luck.

Kerry Kerstetter

Follow-Up:

Dear Mr Kerstetter,
Thank you very much for responding to my e-mail.
Sincerely,

Labels: Estates, Gifting

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 12/09/2008 11:37:00 AM Send this post:

Some useful and informative short articles from the latest Nolo Press email newsletter:

How Living Trusts Avoid Probate

Using Life Insurance to Provide for Your Kids

What You Can't, or Shouldn't, Do in Your Will

Making a No-Frills Will 

Tax-Saving AB Trusts

Using Joint Ownership to Avoid Probate

Labels: Estates

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 5/28/2008 09:01:00 PM Send this post:

Labels: Dims, Estates

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 4/22/2008 02:43:00 PM Send this post:

Q:

Subject: Estate Taxes

My wife died with a will that basically leaves everything to me.  Two houses were right of survivor,  One CD she owned alone that was pod.  Both of her iras were also pod.  The only thing she had in her name alone that wasn't pod or ros was stock valued at about $13K.  The total value of the above was about 700K.  My attorney says that I can pass any amount of the above to our two children without any tax consequences.  It seems strange that the amount is an option.  I want to pass along to them as much as I can afford without putting myself in a cash bind, however it seems odd that I can pick an amount in lieu of dividing everything in half and giving them her half.

 

I ask my accountant and to be honest I was as confused as I was after discussing it with my lawyer.

 

Thank you,

 A:

There is obviously a bit of miscommunication here, both with your attorney and your accountant.  The transfer of ownership of the assets left behind by your wife is neither as simple as you are inferring from your attorney's comments, nor should it be as complicated as your accountant is making it out to be.

Each type of asset needs to be evaluated separately in regard to its taxability for the recipient, as well as its new stepped up basis for the recipient's records.  You didn't say if you are in a community property state or not; but that fact is very important.  If so, the entire cost basis of most of the assets is stepped up to its fair market value as of the date of your wife's death; while in non community property states, only the half owned by her is stepped up and your original half remains the same.

As your advisors should be explaining to you, most of the assets will pass with no tax consequence, with the main exception of the IRA accounts.  Depending on what types of IRAs those are (conventional, non-deductible, Roth), they will most likely be taxable to the recipient, unless they are properly rolled over.

Your best bet would be to sit down with your legal and/or tax advisors and go over each item in your wife's estate individually and discuss these points.  If neither of your advisors feels comfortable discussing these items in easy to understand terms rather than blanket generalizations, you will need to find a new advisor to work with; at least just for this matter.

I wish I could be more help, but that's all I can do for you at this time.  Good luck.  

Kerry Kerstetter

Labels: Estates

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 9/11/2007 12:21:00 PM Send this post:

Labels: comix, Estates

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/15/2007 10:48:00 AM Send this post: