Regardless of your political persuasion, the recent events in our nation’s capitol have been breathtaking and, with an election soon at hand, the drama will most certainly continue. While there are many uncertainties at this point, there are some things that we do know. First, our country has more debt than most of us can even comprehend. Second, the economy is on tepid ground and the problems facing Europe will most certainly affect our recovery. Finally, neither side of the political isle in Congress has shown a willingness to work together.
What does this mean for you and me? For the last few years most of us have not had to worry about estate taxes. Only if your estate was worth more than $5 million ($10 million for a married couple) would you have to be concerned about paying this tax. As of January 1st the Federal Estate Tax Exemption will drop from $5 million to $1 million. Every dollar in your estate over that threshold will be subject to a tax of up to 55%.
The number of Americans with an estate worth over $5 million is a relatively small number but when the exemption drops in 2013, millions of Americans will now be subject to estate taxes. Keep in mind, your estate includes your home, life insurance, retirement accounts, savings and much, much more. How long did it take for you to earn all of the money in your IRA? How long did it take to pay off your home? How much work to build up your savings? Those assets took time and work to accumulate and should pass to your loved ones, not Uncle Sam.
We all wish we had a crystal ball to see the future. It would be nice to know for certain what the taxes will actually be when we die, or for that matter it may be nice to know the day we were going to die. Unfortunately, there is no crystal ball, but there are things you can do to prepare. There are many tools available to help minimize or avoid estate taxes, such as a Living Trust. Of course everyone’s situation is different and your planning should custom fit your needs. Proper planning can help you pass more of what you worked so hard for onto your family rather than the federal government. Remember the saying, “If you fail to plan, you plan to fail”. You have to take the first step and MH can help!
Contact MH today at 888.222.1328 to schedule a free consultation to secure your future.
Contributed by MH Phoenix attorney West Hunsaker