ESTATE TAXES
Estate taxes are levied upon the transfer to a next of kin’s or beneficiaries value of estate that he inherits from a deceased person that had him as the next of kin in their will.
This levy is usually imposed to assets left to the next of kin but it does not apply to the transfer to a living spouse. The portion of the tax levied upon asset has to have surpassed a limit set by law as currently it stands at $600,000 and this could include proceeds from insurance. In other states in the U.S it is called an inheritance tax. Spouses have a right that enables them to leave any amount to the other and this is known as the unlimited marital deduction as this also falls under estate tax.
TAXABLE ESTATE
Mathematically; summed value of the assets left subject to taxation less his liabilities together with the prescribed portion of deductible tax left by the late/ deceased.
Simply it is the amount that remains in the deceased estate that is going to be taxed. The amount that is taxable is then assessed and paid out to the next of kin only after the tax has been paid.
WAYS TO REDUSE ESTATE TAXES
- Marital transfers - With the exception to the spouse being a non-citizen, neither bequests when one’s spouse dies nor their lifetime gifts are subjected to estate taxes. Estate of the spouse pays taxes on the spouse’s entire estate that is taxable. This does not eliminate taxation of estates, rather it defers them.
- Lifetime gifts to kid and grandchildren - One could make annual gifts to children without incurring gift taxes. Under this, the total amount (size) that is levied upon an estate will reduce since both parents ability to send gifts annually is exercised by them simply because under this the intended transfer to the beneficiaries of the couple is substantiated.
- Uniform transfer to minors - It is a type of gifting used when minors are involved. The annual exclusion of and for lifetime gifts are under this category.
- Ab and Qtip trusts - When it comes to Ab trusts it ensures that each spouses unified credit is used fully during the life of the alive spouse whilst a Qtip trust lets the spouse transfer their trust and at the same time have control in the disposition of assets in question until the spouse dies.
- Irrevocable life insurance trusts - When you transfer portions of the estate in small bits to an irrevocable life assurance trust, and by doing so you reduce the size of your estate that is taxable of his or her taxable and assurance proceeds are never taxed.
- Private annuity - It is a sale of the asset to the younger generation and when this is done the asset is removed from the owners’ list of belongings.
- Qualified family owned business - They are usually deducted from the gross estate and that is a relief to heir, hence the estate taxes will go down.
- Special use real estate valuation - The estates are valued at their highest and best value, but the law requires that we use the real estate value when it comes to the subject under consideration.
- Charitable transfers - They reduce the size of the estate and in turn reduce the size of the taxable estate.
GIFTS AND GIFT TAXES
In human societies we view gifts as a present given to us to show affection or during a special occasion. In economics, it has been elaborated it as the gift economy.
In economics, a tax that is imposed on money that is being given to the other person is known as gift taxes. It is also imposed property that is being exchanged as gifts. Mostly gifts are exempted from taxation due to the existing laws.
