Mike Collins: Hi! I am Attorney Mike Collins. Today, we are going to spend some time talking about why every responsible adult should have a basic estate plan in place. Taxes of course can be a troublesome and expensive consideration. We are talking about what is technically referred to as a transfer tax; a tax on a person's right to take property they own while they were alive and leave it to their beneficiaries or their heirs.
There are different forms of death taxes. There was until recently a federal estate tax, 20 jurisdictions in this country today have their own independent either estate tax or an inheritance tax which is another form of death tax. There is a third potential tax referred to as the Generation-skipping transfer tax.
If taxes are an issue in your state, keep in mind it's not the only element of your estate plan, many people think that estate planning and tax planning are the same thing, they are not. But, tax planning probably represents the best dollar for dollar return on a small investment in basic planning if your estate does rise to the level where it triggers one of these so called death taxes.
If you own a home, you've got a retirement account, you've got a couple of investments, you've got some life insurance, doesn't take long to get to that million dollar figure for estate tax purposes. So you add all these elements up and then you're allowed to subtract debts and expanses, if you've got a state estate tax, another set of considerations and the value of your exemption will vary from state to state. There is also a potential for inheritance tax in some jurisdictions and it will typically ask two questions; one, how much should they get? And secondly, how closely if at all were they related to the person who died and left them something?
The good news about estate tax, both federal and state estate tax is that there are many, many ways that enable us to dramatically reduce the estate tax burden on our families. So if your estate is getting anywhere close to that million dollar level, look into the options available to you both under your state law and under the federal law which is imminent.
So here is the bottomline so called death tax. Remember, every time the Congress, every time a State Legislature convenes, there is the potential for changes in the tax law, both on the state and the national level. If you get any inclination at all, do you think that your estate is going to get up close to that million dollar level or that the politicians have been tinkering with the tax code, be sure to call your estate planning attorney. It will be very expensive to ignore those changes.