Estate planning generally has three purposes: to reduce estate taxes, to avoid probate and to protect beneficiaries.
Failing to plan can result in unnecessary expenses and leave your executor with the task of sorting through your estate. But creating a plan isn’t enough; you have to revisit it to ensure it remains relevant.
When it comes to estate planning to protect your business, your family and your assets, you need a good estate plan that is flexible, allowing you to take advantage of what the rules are now and what they will be in the future.
What are the current estate tax rules?
In 2010, if you passed away, there was no estate tax. Late in 2010, President Barack Obama signed the Tax Relief Act which said that, in 2011 and 2012, you can exclude up to $5 million from your estate while anything above $5 million is taxed at 35 percent. The rules in place now say that in 2013, the exclusion will be $1 million adjusted for inflation, and the highest tax rate could go to 55 percent.
Sitting here in 2011, no one thinks that’s actually going to happen, but in 2001, no one thought there would be an unlimited amount of untaxed estate in 2010. Although it is a guessing game, there are steps you can take to protect your estate.
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Have questions about your estate plan? Post a comment below or contact our Tax Planning & Preparation Group at 440.449.6800.