The estate tax is a tax on a person’s assets after death. In 2020, federal estate tax generally applies to assets over $11.58 million. Estate tax rate ranges from 18% to 40%. Assets spouses inherit generally aren’t subject to estate tax. The estate tax, sometimes called the “death tax,” is a tax levied on the estate of a person who has recently died. It applies to the money and assets in an estate before they are dispersed to a person’s designated heirs. Only estates that reach a legally defined threshold are subject to the estate tax. The inheritance tax is different from the estate tax. The inheritance tax applies to money after it has been passed on to beneficiaries, who are responsible for paying the tax. Utah does not levy an inheritance tax. However, inheritance laws from other states may apply to you if someone from a state with an inheritance tax leaves you something. Utah does not have a gift tax. There is a federal gift tax exclusion of $15,000 per receiver per year. If you gift one person more than $15,000 in a year, you must report it to the IRS. The gift in excess of $15,000 will reduce your lifetime exemption of $11.18 million and your federal estate tax exemption. Inheritance TaxInheritance tax is a tax paid by a person or persons who inherit the estate (money or property) of a deceased person. In some jurisdictions, the terms “estate tax” and “inheritance tax” can be used interchangeably. The inheritance tax is essentially collected from the heirs or beneficiaries of the estate of a deceased person. The tax is payable upon the transfer of the estate to the beneficiaries. In most cases, each heir is responsible for paying their own inheritance tax based on the portion of the estate inherited. The relationship between the deceased person and the beneficiary may impact the necessity to pay the inheritance tax. For instance, spouses are generally excluded from paying the tax. In addition, the entities and organizations that receive the estate as a charitable donation from the deceased person are not required to pay the tax as well. The lineal descendants, and ancestors, including parents, children, siblings, and grandparents, as well as remote relatives and non-relatives, typically must pay the inheritance tax. However, the remote relatives and non-relatives generally face a much higher tax rate as compared to the close relatives. Generally, the tax is imposed based on the value of the estate. In certain scenarios, if the value of the estate is below a predetermined benchmark, it will not be imposed. Estate PlanningEstate planning is the process of designating who will receive your assets and handle your responsibilities after your death or incapacitation. One goal is to ensure beneficiaries receive assets in a way that minimizes estate tax, gift tax, income tax and other taxes. Estate planning can help establish a platform you can fine-tune as your personal and financial situations change. Steps to Basic Estate Planning Establish your directives: A complete estate plan includes important legal directives. A trust might be appropriate. With a living trust, you can designate portions of your estate to go toward certain things while you’re alive. If you become ill or incapacitated, your selected trustee can take over. Upon your death, the trust assets transfer to your designated beneficiaries, bypassing probate, which is the court process that may otherwise distribute your property. A medical care directive, also known as a living will, spells out your wishes for medical care if you become unable to make those decisions yourself. You can also give a trusted person medical power of attorney for your health cares, giving that person the authority to make decisions if you can’t. These two documents are sometimes combined into one, known as an advance health care directive. A durable financial power of attorney allows someone else to manage your financial affairs if you’re medically unable to do so. Your designated agent, as directed in the document, can act on your behalf in legal and financial situations when you can’t. This includes paying your bills and taxes, as well as accessing and managing your assets. A limited power of attorney can be useful if the idea of turning over everything to someone else concerns you. This legal document does just what its name says. It imposes limits on the powers of your named representative. For example, you could grant the person the power to sign the documents on your behalf at the closing of a home sale or to sell a specific stock. Be careful about who you give power of attorney. They may literally have your financial well-being and even your life in their hands. You might want to assign the medical and financial representation to different people, as well as a backup for each in case your primary choice is unavailable when needed. • For the protection of beneficiaries: An estate plan invariably protects the interest of beneficiaries by ensuring that their shares are properly specified and preserved. If an individual has a child who is a minor, the individual can designate guardians and trustees who will oversee the financial and other needs of the minor. On the other hand, if the individual’s children are adults, but are unable to manage finances or assets, the individual can create a trust to protect the children from making bad decisions. Estate Administration LawyerWhen you need legal help with inheritance, estate, probate, trusts or wills, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
Ascent Law LLC
8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506
Ascent Law LLC
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