Making the most of the estate tax exemption


Residents in California know that estate planning can be very complicated. This is especially true due to increasing taxes and a number of changes to state and federal law that make shielding your hard-earned money from unnecessary taxation extremely difficult. Estate planning isn't a one-time deal. It's something that people with substantial estates need to take seriously and revisit frequently, especially as their personal and family situation evolves. The changes in California and federal law leave the unaware vulnerable to massive tax increases.

One way California residents can take advantage of the federal estate tax and actually double the amount of value that one can pass without incurring federal taxes, is by leaving the estate tax exemption to a surviving spouse upon a person's death. Married couples may transfer limitless property and assets between each other without incurring taxation. This means that a surviving spouse's share of the estate does not count against the deceased's estate tax exemption.

When one spouse dies and does not use up the $5.25 million in estate tax exemption allotted to every U.S. citizen, the surviving spouse may use that remaining portion of estate tax exemption as their own. This is in addition to their own $5.25 million.

However, like any complicated tax issue, people must be aware of the right form to fill out. There are also strict time limitations to take advantage of this estate tax. In this case the surviving spouse only has nine months from the death of their husband or wife to submit this complex and frustrating IRS paperwork.

Of course, laws are constantly changing, and people who aren't experts in the field may not know about new rules and provisions that may cost them hundreds of thousands or even millions of dollars. People in California should always discuss and formulate their estate plan with the guidance and expertise of an experienced professional. This can guarantee that they are well informed and are making willful and intelligent decisions about their estate and trusts.


Source: MarketWatch "How to double your estate-tax exemption," Melody Juge, July 29, 2013

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