Estate tax must be considered by anyone who is planning for their family’s future. If you own a family business, it is important to protect the main source of income for your loved ones and any investments you may have made during your lifetime. A knowledgeable, friendly attorney can help you master this important aspect of the estate planning process.
Estate tax is applied to large fortunes and is calculated when you transfer your possessions at your death. It does not affect anything below the tax-exempt sum set by the government. Property that was transferred prior to your death won’t be affected. In order to determine the amount of tax you owe, the fair market value of everything you own or have an interest in will be considered.
Taxable Assets
Taking care of your family is your first priority and it helps to know which of the assets you plan on leaving to them will be considered for taxation after you die. The property you own that is a part of your family’s business, life insurance proceeds and all of your business interests will be taxed. If you own a small business, other assets will also be considered for estate tax, including:
- Vehicles
- Cash
- Securities
- Annuities
- Trusts
In addition to owning a small business, some people also create other investment vehicles. This helps them to diversify their income. When you are considering estate taxes, you must remember that these investments will be considered as well. If you do not want them included, talk to an experienced attorney about solutions that will work for you. They can help you to find options, no matter how complex your financial arrangements may be.
All of those assets comprise your Gross Estate and are typically eligible for tax. A knowledgeable tax attorney can help you to plan your life insurance and other investments so that your family benefits fully from these assets. With full access to your life insurance benefits, your family can pay for retirement plans or college education and even fund buy-sell agreements for your business.
Will Your Family Have To File A Return?
Some small business owners have combined assets that are less than the amount the government considers for estate tax purposes. In order to decide whether your family will need to file a return, they must calculate your Taxable Estate. Basically, your taxable Estate is the net value of your assets after your expenses are subtracted from your Gross Estate.
Your actual Taxable Estate expenses are determined by adding your personal debts, mortgages on your business properties, gifts to charities and the fair market value of the property that will be owned by your spouse. People who have estates that consist only of cash, insurance or a few other assets do not usually have to file an estate tax return. If your assets amount to more than $5.45 million when they are combined, your family will have to file an estate tax return.
Since 2011, it has been easier to transfer unused exemptions to your spouse when you die. This means that effectively, people who are married can access double the exemption and hold a greater portion of their assets for their family. You can preserve more of your family’s wealth and hold on to a greater portion of your assets by fully utilizing the exemptions available to both of you.
Preserve Your Wealth
People who plan ahead can often reduce or even completely eliminate estate taxes. Congress sets the exempt amount and this has been consistently rising over the years. If you are a single parent or unmarried, you can make use of life insurance to reduce the taxes that you pay. Some people also decide to remove assets before they die, since the assets at your death are what the government considers for estate taxes. With friendly legal advice, you can develop strategies that work well for your needs.
Taxes may decrease the resources you want to give to your spouse and other dependents. Speak with an experienced estate planning attorney today about proven methods of preserving more of your hard-earned wealth for your loved ones. Planning for estate tax gives you greater peace of mind, protects your assets and helps you to create an enduring legacy for future generations.
Call the Law Offices of Bj Richardson today to discuss your business law planning needs.
