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Estate & Gift Tax

1. Legacy includes:

  1. Residential

  2. Other real estate

  3. Savings, such as savings accounts, fixed-term deposits, currency, market accounts

  4. Investments, such as stocks, bonds, mutual funds

  5. Individual retirement accounts and/or other retirement accounts, such as 401(K) plans, individual retirement accounts (IRA)

  6. Life insurance policies and annuities

  7. The value of business ownership

  8. Vehicles, such as cars, boats, airplanes

  9. Jewelry

  10. Collectibles, such as artworks, antiques

  11. Other personal property

2. Inheritance tax

1. Calculation method of inheritance tax

Inheritance tax has two parts: federal and state. As each state has different inheritance tax laws, we are here to discuss federal inheritance tax.


Inheritance allowance:  Federal inheritance tax allows each taxpayer to transfer a certain amount of inheritance tax-free. Currently federal estate The tax allowance is 3.5 million U.S. dollars. According to current regulations, the inheritance allowance in 2011 will be reduced to 1 million U.S. dollars.


Gift allowance: The  federal increase and allowance allows each taxpayer to gift assets to any beneficiary before their life. Currently gift exemption The amount is USD 1 million accumulated for each lifetime. In addition, USD 13,000 per person per year will not be counted as the lifetime gift allowance.

*Between husband and wife:  (The recipient must be a citizen) Unlimited tax-free transfer of assets

*Charity:  You can donate assets to charity without limitation and tax-free.

As for how much inheritance you have after your death can be exempt from federal estate tax, you must deduct the total amount that has been given from the inheritance allowance.

The following table lists the federal estate tax exemptions and applicable tax rates by year. The highest federal estate tax rate in 2009 can reach 45%, and in 2011 it can reach up to 55%
. The highest amount of tax exemption years. Estate tax rate
2009 $3,500,000 45%
2010 Repealed Estate tax
2011 $1,000,000 55%

After planning, you can reduce the estate tax to a minimum. In addition, you may also have to pay the state estate tax or inheritance tax. For example: New York State's estate tax allowance is 1 million, and the excess part is subject to New York State estate tax. New Jersey The inheritance tax allowance is only 675,000, and the excess is subject to New Jersey inheritance tax; in addition, New Jersey has inheritance tax incentives for beneficiaries of inheritance.

2. Minimize inheritance tax

There are some estate planning methods that can help you minimize federal and state estate taxes. Below we briefly describe a few of them.

Gifts of living property: Subject  to certain restrictions, the federal tax law generally allows each person to give $13,000 per year (regularly adjusted for inflation) to anyone without incurring gift tax. In other words, you can Transfer part of this property to your daughter or other people during your lifetime, thereby reducing the total amount of stress to be paid. For example, you and your spouse can each give each daughter US$13,000 each year, so that each daughter will have 26,000 per year U.S. dollars do not have to pay gift tax. If you give more than $13,000 to anyone each year, you do not have to pay federal gift tax for that year, but the excess will be deducted from the applicable tax allowance.

Use spouse deductions to reduce inheritance taxes: Federal tax laws generally allow couples to transfer assets (with no limit on the amount) without having to incentivize gift taxes and inheritance taxes. But this method is not without its flaws. Because when both husband and wife have passed away Later, the spouse deduction may increase the total federal estate tax for the couple. To avoid this problem, many couples choose to set up an inheritance trust (Bypass Trust).

Inheritance trust or inheritance tax relief trust:  Allows couples to take full advantage of the marriage deductions while enjoying all applicable tax exemptions. For example, suppose a couple is required to pay federal taxes with an estate value of 4 million U.S. dollars (2 million U.S. dollars per person) ). If you use the marriage deduction, when one spouse dies in 2009, you can transfer all of the $2 million inheritance to the other spouse without paying any inheritance tax. When the other spouse passes away in 2009, it will be left to The daughter’s $4 million inheritance. At this time, the portion of the total inheritance exceeding the applicable tax allowance will be subject to inheritance tax. (After the $4 million inheritance minus the $3.5 million allowance, the remaining $500,000 needs to be taxed) .

By setting up an inheritance trust or inheritance tax relief trust, the spouse who dies first can transfer the tax-free inheritance to the trust. The trust will then provide the living spouse with income and limited principal. When the surviving spouse also dies, the assets of this trust Will be allocated to children and other beneficiaries. In this way, the spouse who dies first can make full use of the applicable tax allowance. In this way, the assets in the trust will not be included in the total estate of the surviving spouse. The total amount of the surviving spouse’s stress will be reduced, and the same You can use your own tax allowance. In the same couple listed above, the surviving spouse’s estate does not have to incur federal estate tax. Since both spouses make full use of their respective applicable tax allowances, they can transfer the entire estate tax exemption to Beneficiary.

Charitable donations are tax-exempt, but they must be donated to tax-exempt charities approved by the U.S. Internal Revenue Service, such as religious, charitable, or educational undertakings.

Life Insurance Trust: It  can exclude the life insurance policy’s Lee Pei Gold from the total amount of inheritance and enhance the liquidity of the estate. Generally, you can transfer an existing life insurance policy to a life insurance trust, or the trust can purchase a new one (Please note that if there is accumulated cash in the insurance policy, the transfer of the policy may require the use of the gift tax allowance.) To prevent the life insurance claims from being included in the total estate, the trust must be an irrevocable trust, that is, the trust cannot be revoked in the future. Modify the terms of the trust. With proper planning, the life insurance claims in the trust can be transferred directly to the beneficiary without having to pay income tax or estate tax. This estate is cash, and the beneficiary can use it to pay estate taxes or other expenses, such as debt or Funeral expenses.