In 2013 the estate tax exclusion is going down to just $1 million under the schedule that currently exists. We add the caveat “currently exists” because there can always be last-minute changes to existing laws.
So, anything that you try to pass along to your loved ones that exceeds $1 million in value will be subject to a 55% federal estate tax next year.
If you include the value of your home or perhaps your primary place of residence and your vacation home you could easily be in possession of resources that exceed this number. As a result you may benefit from looking for ways to remove the value of your home from your estate for estate tax purposes. This can be done by placing the property into a qualified personal residence trust.
Once you place the home into trust it is no longer part of your estate. This is considered to be an act of taxable gift giving, but with these trusts you continue to live in the home for an interim that you determine when you create the trust agreement.
While you remain in the home you are retaining interest in it. So, the taxable value of the gift is reduced by this retained interest. Ultimately the taxable value will be a great deal less than the true fair market value of the real property in question.
At the end of the trust term the beneficiaries, presumably your children, would assume ownership of the home tax-free if the taxable value was within the gift tax exemption amount that was available to you.
To explore this and other strategies that can help you preserve wealth for the benefit of succeeding generations simply take a moment to set up a consultation to speak with a good Willoughby OH estate planning lawyer.
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