Historically, in 2009 the Estate Tax exemption was $3.5 million per person and anything above that amount was taxed at 45%. President Obama signed the Tax Relief Act into law on December 17, 2010, which sets the estate tax exemption is $5,000,000 per person and any amount above $5,000,000 is taxed at 35%. Come 2013, the estate tax exception is set to revert back to 2001 and 2002 levels of $1,000,000 per person and any amount above that will be taxed at 55%.
You can reduce your exposure today!
Maximize Annual Gifts
Anyone can give cash or assets valued up to $13,000 a year to anyone else without it counting against the $1 million limit on lifetime gifts. Married couples can combine their yearly gifts to give away up to $26,000 to as many people as they like. For instance, a husband and wife may give their married daughter who has two children $26,000 per person, totalling $104,000 per year to reduce their estate.
Pay Tuition and Medical Expenses
Without using your $13,000 annual exclusion, you can pay for tuition, medical, and dental expenses for anyone you want. Be cautioned however, that the payment for such expenses must be made directly to the providers of those services. You cannot simply reimburse the people who you are benefiting.
Some people do not realize that you can pick up some big ticket expenses such as health insurance premiums, medically necessary home improvements, or home care professionals.
If you have any questions, contact The Singh Law Firm, Fremont, California Estate Planning Attorneys, as there are other more advanced and permissible products which also reduce your exposure.