If you don't want to waste your dollars, its critical that you understand estate tax planning basics and how to avoid estate tax.
The Annual Report on the United States Government reports that Americans paid $26 Billion in estate taxes in 2006. Every dime of those taxes could have been avoided. How do you think the kids felt when they wrote out a check for $300,000 for estate taxes and then learned from the attorney that mom and dad could have saved them every penny?
If you don't like wasting money on taxes and don't want your kids squandering money either, then these estate planning basics will explain what you need to do.
You must realistically answer these questions:
1. Will your estate be worth more than $1 million ($2 million for a married couple) when you die? If Congress does not change the estate tax rates and limits, from 2011 and later, estates above $1 million will be subject to estate tax.
2. Do you have any assets that could be double-taxed at your death (double taxed by income and estate taxes, which could consume 70% of the value) such as IRAs and annuities? Estate planning basics require that you plan now to avoid this double tax and there are many ways to do so.
3. Do you think that if you need to take action, that your attorney would call you up on the phone and tell you? (He probably won't as many attorneys wait until you call them). So an important estate planning basic is that no one will tell you what to do. You need to ask.
4. Do you think you have plenty of time to take care of any estate tax problem--like the people who paid $26 billion last year? Probably the most critical of the estate planning basics is to not procrastinate. Death does not discriminate by age. If you are 35 and have a family, get your estate planning in order now.
5. Do you incorrectly think that estate planning means giving up control of assets or making gifts or giving to charity? (A fundamental of estate planning basics is that you can keep total control of assets yet still remove them from your taxable estate).
6. Do you have the false notion that a living trust will eliminate your estate taxes?(You will pay estate taxes on assets over the exempt threshold, living trust or not).
7. Do you think that you need to die in order to get your estate tax exemption? (You don't, $1 million is available right now and many wealthy people use their exemptions when they can make the most of them, during their lifetimes).
If you answered "yes" to any of the above estate planning basics misunderstandings, you probably have an estate tax problem.
Your next step--ask your retirement consultant or your CPA what you need to do to get your estate in order.