If your estate is in taxable territory you would do well to take action to preserve your wealth. The first step is to determine if in fact your resources exceed the federal estate tax exclusion amount.
As of this writing the exclusion is $5.12 million and the maximum rate of the tax is 35%. However, as laws stand on this day the exemption is going down to just $1 million while the rate rises to 55% when 2013 arrives.
There are over 8 million households in the United States with resources exceeding $1 million, so the estate tax is going to be a factor for a lot of us next year.
It would be logical to decide that you will give gifts to your loved ones while you are still alive in an effort to mitigate your estate tax exposure. Unfortunately, there is a gift tax in place that carries the same rate as the estate tax with which it is unified.
There are however some gift tax exemptions that can be utilized, and one of them is the $13,000 annual exemption. You can give gifts totaling as much as $13,000 each year to as many gift recipients as you choose to free of the gift tax.
This is a per person exemption, so if you are married you and your spouse could give as much as $26,000 every year to your heirs tax-free. If you were to do so over an extended period of time you may be able to significantly reduce or even eliminate your eventual estate tax exposure.
If you would like to learn more about strategies such as these that are widely utilized to gain estate tax efficiency, take action right now to arrange for a consultation with a seasoned, savvy Cleveland OH estate planning lawyer.