1. What is Estate Planning?
Answer – Estate planning is the process each family goes through to make sure that all the family’s assets can pass from one generation to the next. The process involves both family and tax considerations and may wind up being reviewed and maybe redone several times during the average person’s lifetime.
2. What are Estate, Gift, and GST Taxes?
Answer – The Internal Revenue Code imposes 2 basic levels of tax on transfers of wealth from 1 generation to the next. Transfers during an individual’s lifetime to a person other than that individual’s spouse are subject to gift tax. Transfers following an individual’s death to a person other than that individual’s spouse are subject to estate tax. Gift taxes and estate taxes both currently have a threshold limit of $5,250,000 i.e. gifts and inheritances below that amount are not subject to tax. This figure is a combined limit for transfers during life and at death. Transfers above that amount are subject to tax at a starting rate of 30% with a maximum tax rate of 40%.
The Generation Skipping Tax (GST) is an additional tax imposed on direct transfers to individuals more than one generation removed from the person making the gift or transferring assets after death. Lifetime transfers to grandchildren (or other persons one generation removed i.e. great nieces, great-nephews, etc. become taxable at a 40% rate for any gifts over $1,000,000 while at-death transfers only become subject to tax for amounts over $5,250,000.
This article is for general informational purposes only, is not for the purpose of providing legal advice, and does not establish an attorney-client relationship. You should consult with an attorney to obtain advice as to your particular issue or circumstances. 530045.1