The number of estates subjected to federal estate taxes will skyrocket next year to an estimated 44,200, compared to just 5,500 estates that were subjected to the estate tax in 2009, The New York Times reported.
The estate tax can have an enormous impact and can even force the sale of a farm or family business. Some studies have even suggested that substantial changes to the estate tax can impact death rates -- increasing the number of deaths that occur right before an increase and decreasing deaths in the weeks leading up to the enactment of a tax break.
The federal estate tax -- or death tax as it is sometimes called -- was eliminated for 2010. It returns next year with a tax rate of up to 55 percent on estates worth more than $1 million. It applied only to estates valued at more than $3.5 million in 2009 and the maximum rate was 45 percent. Hiring a New York City estate planning attorney is critical to minimizing your exposure to estate tax while ensuring that your estate is distributed to heirs in accordance with your wishes.
The Wall Street Journal reports that a new proposal on the table would hit wealthy taxpayers harder than anything yet suggested. It would return the exemption threshold to $3.5 million, or as much as $7 million per couple, while reducing the maximum tax rate to 45 percent. But estates valued at between $10 and $50 million would be taxed at a rate of 50 percent. Estates valued at more than $50 million would pay 55 percent and those worth more than $500 million would pay 65 percent.
One thing might be as certain as death and taxes and that is that Congress will never be done playing with the estate tax rate. But, with proper estate planning, you can focus on minimizing your exposure to estate taxes, at whatever rate happens to be in place at the time of your death.
With advanced planning, many families can legally shelter significant portions of an estate from taxation. Living trusts, tax advantages associated with passing gifts to your heirs while you are alive, and other tax and estate-planning options can help protect a family business from taxation and will ensure that more of your estate passes to your chosen heirs.