Estate tax rules 2011-2012
This post is for those of you who die in 2011-2012? What- you don’t know when you are going to die? Then maybe you better read on, just in case….
The IRS “clarified” (does that qualify as an oxymoron Donna-my new writing guru?) the death tax rules for 2011-2012.
Estate Taxes: Need a crystal ball?
Estate Tax Changes
Congress changed the amount of your estate that is subject to “Estate Tax” to 5 million bucks per person/10 million per couple. Before you get all class war-farey on me, I don’t have to worry about it. (I tell my kids if anything is left, I calculated wrong….)
Many more people than you realize fall into this category when you add in the value of their personal business, their inheritance from Grandma, and their retirement savings. (until recently I would’ve added the value of their home….)
What got my attention is the IRS clarified that you can “roll-over” your estate tax deduction.
Roll Over Unused Estate Tax
Let me explain:
- In the past, if you died with an estate worth more than the tax free amount, that money got taxed at up to 55%-pretty onerous in anyone’s book.
- With recent Estate Tax changes, that amount in the future maxes out at 35%.
- When one spouse died in the past, if his/her estate was worth more than the “tax free” amount, that difference was taxed. To prevent the widow/widower from losing a hunk of dough to the government-trusts and other “gimmicks” were invented to allow the surviving spouse the use of that money without a third or more going straight to the government.
Now with the IRS rules clarification, if one spouse dies and his estate is less than the $5 million exemption, the unused portion can be rolled over to the other spouse-to be used at his/her death.
Example:
If I died and had a 3 million dollar estate and the exempted amount is 5 million, when my spouse dies her estate can use the 2 million exemption that I didn’t need.
Dr Dean Dies (oh no….): 5 million (available) minus 3 million (needed)=2 million (leftover). When Mrs. Dr Dean dies she gets her 5 million exemption, plus my unused 2 million. So she can leave an estate valued at up to 7 million to her new lover/husband (or our, his, their children/grandchildren, charity) tax free.
Clear as mud huh…
That’s another in the long list of unintended consequences of government regulation. And even more fun, this one expires in 2012. How’s that for long term planning!
Now I have to get back to work.I want to get my net worth right to the edge-but not over….where did I leave my crystal ball?
What say you?
Do you care? Will this effect you, your parents, or grandparents? Do they need a combination Attorney, CPA, and Psychic to figure out what to do with their estate?
(and remember, if you need this kind of help, you can afford a professional-Go! Now! Spend some money on worthwhile advice!)
{photo credit: a_whisper_of_unremitting_demnd…. c.c.}
Speakin’ of Google + I’m there as Dean Burke….they wouldn’t let me use Dr Dean… Put me in one of your circles, I’ll feel so special….
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