| Estate taxes may be the largest single tax expense your family will ever face. With Pennsylvania inheritance tax rates as high as 15% and maximum federal estate tax rates slightly under 50%, you simply can’t afford not to plan. Otherwise, you could lose to taxes nearly two-thirds of what you spent a lifetime building. Fortunately, recent tax law changes have provided new, exciting opportunities to protect your wealth. |
STEP #1 - Who should inherit your assets?
The first step in estate planning is personal. You must decide who should inherit your assets. Here are some of the questions you need to consider.
- If you are married, what do you want to provide for your spouse?
- Should your children share equally in your inheritance?
- Do you wish to include grandchildren or others as beneficiaries?
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Would you like to give anything to charity?
Do you need to worry about estate taxes? The answer
depends on how much your estate is worth. Write down how much you think
your estate is worth. If you are married, include both your assets and
your spouse's assets. Be sure to include all your assets. Don't forget
to include your personal residence, automobiles, loans to family
members, and all retirement benefits. And be sure to include all life
insurance policies you own. If you own that policy when you die, the
proceeds usually are included in your estate. If your estate is large
enough, nearly one-half of those insurance proceeds may go to the
federal government as taxes, not to your chosen beneficiaries. If your
estate exceeds $2,000,000 in 2007 and 2008 or $3,500,000 in 2009, your estate may be subject to federal
estate taxes.
Once you've completed Steps #1 and #2, it's time to consider the documents you need to carry out your estate plan in a way that minimizes state inheritance tax and federal estate taxes, and maximizes the amount passing to your heirs. Here are some important documents that can help you achieve your estate planning objectives.
- Will - A will is the most commonly used document for transferring your wealth when you die. If you die without a will (intestate), your money and possessions will be distributed according to a rigid formula fixed by state law.
- Living Trust - This is a substitute for a will. A living trust contains your instructions for managing your assets should you become incapable of doing so - and directions for distributing your assets when you die.
- Power of Attorney - This document allows you to appoint someone to act as your agent to handle your financial affairs if you become sick or disabled.
- Health Care Power of Attorney – This document allows you to appoint someone as your agent to handle your health care affairs if you become sick or disabled.
- Living Will - This is a signed written statement that you do not want artificial life prolonging procedures (such as a respirator) when there is no hope of recovery.
- Irrevocable Life Insurance Trust - This advanced estate planning device allows a person to pass more than the exemption equivalent amount ($2,000,000 in 2007 and 2008) free of federal estate taxes.
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Family Limited Partnership - This is a
special form of limited partnership which allows you to give your
family members ownership interests in the partnership, but you retain
the absolute right to control its activities.
Creating an estate plan requires careful consideration of the many options available. There is no "one size fits all" solution. What works well for your neighbor may be unsuitable for you. You need to understand how various strategies affect your control, risk, and tax liability. You have been given some things to think about as you create your estate plan. But that's only the beginning. Now you need to take action.
Attorney Kline would be happy to meet with you to
discuss your particular situation. He can help you develop and implement
an estate plan that attains your goals and preserves for your heirs
what it took a lifetime for you to accumulate.
For more information, call 610-559-8668 or send an email to
karl@karlkline.com.
