Sep 08, 2010

55% Estate Tax? Say it isn't so.

tax dollars.jpgLiza:  I heard that in 2011 a person who dies will have to pay 55% in estate taxes. That couldn't be true, is it? That seems like an awful lot of taxes. is there a way around this? Sorry, but at this point, that's the plan. Unless Congress acts to change the law, the estate tax is scheduled to be 55% as of 2011. The amount that each of us can give away at death free of tax is scheduled to be $1 million, so the tax won't touch everyone, but it will hit many people, since life insurance proceeds are subject to the estate tax. As for getting around it: the obvious answer is don't die in 2011 and hope Congress raises the amount that's excluded from the tax before you do die, but I suppose that's not helpful. You can make charitable gifts, which, in addition to supporting good work in your community will reduce your taxable estate dollar for dollar. If, for example, you have $3 million dollars in assets and give away $2 million to Doctors Without Borders upon your death, you would not have a taxable estate. Also, gifts to your spouse are estate tax free--although their estate will be subject to tax when they die, so that just defers the tax, but doesn't reduce it.