When the subject of inheritance is being discussed, people almost always ask this question to their Will and Trust lawyer in Cobb County Here’s what you need to know about how you might be taxed on an inheritance.
The IRS expects you to report every source of income. This leads many to believe that they will have to claim an inheritance when they file their annual returns. Good news! An inheritance is not counted as part of your income for tax purposes.
Capital Gains Tax
The capital gains tax kicks in any time a gain is achieved. So, if you buy a dilapidated house to renovate with plans to immediately sell it, the amount of money over the original purchase price would be subject to the capital gains tax.
Inherited assets that appreciated during the life of the benefactor would get a step-up basis. This means that the value of the inherited asset would be subject to capital gains tax from when you inherited them. Good news! You would not be responsible for the gains that took place during the life of the person who left them to you. The key here is to understand that if you do realize a gain in the future, you will be responsible for the capital gains tax from the moment you acquired the asset.
A spouse can transfer unlimited assets to their spouse tax-free. However, there is a federal estate tax that will be applicable to anyone else. Asset transfers that exceed $5.45 million are subject to the estate tax.
One positive I can report is that here in Georgia we do not have a state-specific tax.
So, there you go. You should now have a good idea about whether the money you plan to leave your loved ones will be taxed. The good news is that there are legal methods for reducing your tax burden if you are subject to them. We invite you to call our Cobb County Will and Trust attorneys at 770-425-6060 to schedule an appointment where we can help you create an estate tax plan that best meets your needs.
Three-time New York City Mayor Ed Koch died on Feb. 1, leaving an estate estimated between $10-$11 million. And it’s a good thing that “Hizzoner” loved governing, because one-quarter of his estate will be going to the state and federal governments.
During his tenure as Mayor, Koch was famous for asking people on the street, “How’m I doin’?” He would have been better served to ask that same question to a Family Estate Planning Lawyer before he passed on.
In his will, Koch bequeathed most of his assets to blood relatives – a sister and her husband, a sister-in-law, and three nephews – as well as to his secretary and a charity. And because Mayor Koch used a Will and didn’t put his assets in Trust, it’s all public. In fact, you can read the details of exactly what Mayor Koch left behind and to who right here.
When the former Mayor died, the federal estate tax exemption was at $5.25 million; and since his estate is estimated at twice that amount, Uncle Sam will net a cool $1.45 million. New York State has an estate tax exemption of just $1 million, meaning it will receive $1.1 million from the estate, according to a Forbes article.
As Forbes notes, Koch could have made some savvy estate planning moves before he died by:
Creating a trust for the benefit of his nephews, who inherited the bulk of his estate, and their descendants. Up to $5.25 million that goes into a trust would have been exempt from generation-skipping transfer tax. (And, would have protected those assets for generations upon generations. This was a big oversight.)
Making additional gifts up to $5.25 million right before he died could have significantly reduced his state tax bill, since New York does not have a gift tax. This would have saved his heirs an estimated $600,000.
And there’s more he could have done as well, but he either didn’t get good counsel or he didn’t heed it. Now, it’s too late. And, of course, it’s all public.
If you would like to learn more about strategies to keep your money out of the government and the size of your assets totally private, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Georgia Family Treasures Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.
Welcome to politics in 2012! Did you sign up for what we’re getting in America? In many ways, nobody is happy with the landscape. Most of us—Independents, Democrats, and Republicans alike—are unhappy (or even disgusted) with politics in general. It’s at the point of being most disgruntled, however, that we need to pay the most attention. It’s the point at which real transformation can occur.
Pushing through the urge to disengage and through the resistance to be involved is difficult, but if we don’t all take responsibility for it, then we’ll end up in a place that we don’t want to be in. Think about it like this: Who is taking responsibility for our current situation? The answer is that we should all be taking responsibility, whether we played our role actively or passively.
More Reasons To Be Involved Than Ever Before
Even if the typical issues like taxes, the economy, social matters, job creation, globalization, and fiscal policy aren’t enough to motivate you to be involved, there is one issue that will probably get you off the couch this election season: YOUR MONEY!
On December 31st of this year, a law that provides very good tax treatment for estates will sunset, unless it is renewed by Congress and the President. The current law exempts from taxation estates of $5 million or less ($10 million for married couples). That means that most folks currently fall completely outside the realm of taxation.
If the current law does expire, the law that replaces it will likely tax estates that exceed the $1 million mark. In other words, the new law will almost certainly cast a much wider net, and if you are at all concerned about your wealth, then you should be paying attention to the 2012 elections and writing to your representatives in Congress. Every dollar in your bank account is a reason to be more involved than ever before.
It Can Actually Be Fun
The idea is to fully express yourself, and it’s okay to have some fun while doing it. While the issues are very serious, there’s no reason that you have to take yourself too seriously, even when you’re talking politics with friends and family. When you talk about your favorite candidates, talk about the issues and encourage your loved ones of voting age to research those issues and where the candidates stand on those issues. And smile while you’re doing it!
An election year also presents an opportunity to teach your kids about our electoral system, the reasons it exists, and the importance of being involved. Kids really do believe that they can make a difference in the world, and that idea should be nurtured, since children really are our future.
What You Can Do
Even if the beneficial estate tax laws sunset in 2012, you can take action today to prevent losing significant benefits. There are several things you can do. You can give gifts, you can create a trust, and there are some other tricks that can likely help you save on estate taxes.
If you have questions about establishing an estate plan, please don’t wait to call our offices. Time is ticking. If you call our office today at 770.425.6060 and mention this article by name, we’ll give you a Georgia Family Treasures Planning Session™ free of charge. Don’t wait. November and election time could honestly be too late.