There’s no doubt about it; death in the family can be an incredibly difficult and sad time in a person’s life. However, the very last thing someone is thinking during this time, and understandably so, is taxes. However, because the government and its agencies were not made to reflect human compassion, any taxes owed will need to be taken care of before certain deadlines. Read on to learn further about this very important part of life and how a probate attorney may be able to help you deal with the taxes that come after death.
Seeking Council From a Probate Attorney Before Death
One of the most common mistakes people make while they are alive is not seeking the services of a probate attorney. This is often because most people have this notion that only the ultra-wealthy would ever need to deal with a probate lawyer. This, of course, is not the case, as even those within the lower-middle-class could benefit from a probate attorney Las Vegas service. So, why are they so important to meet with? One of the most common situations that would require the services of a probate attorney is when someone within the family is making noise about not liking their end of the deal when it comes to their inheritance. These family members can quickly cause a lot of trouble at the movement of your death by filing lawsuit after lawsuit. Because you wouldn’t want to put your family through that, a probate attorney may be your best in eliminating as much of that potential issue as possible.
Estate Taxes and Inheritance Taxes
As stated above, bringing in a probate lawyer onto your team is a great route to take, but they are not only there to take care of those rowdy family members. Much of their work also relates to your estate plan. Even if you are just looking to pass on some common items such as a home or car to your family members, taxes are going to play a large part at the time of your death. In this part of the article, we will discuss two of the most common taxes that your family will face at the moment of your death: estate and inheritance taxes.
Contrary to popular belief, donating before your death does not eliminate estate taxes. Estate taxes are those that are paid to the federal government, and they are determined by the number and value of assets you hold. At the moment of this writing, the current number set by the federal government for paying estate taxes is $11.70 million or more. If you do not fall into this income bracket, there is no need to worry about paying an estate tax.
Inheritance Tax or “Death Duty”
The inheritance tax, also known as the “death duty,” is something that would be paid by a vast majority of people. This is because your state government is now looking into the assets you have acquired from your family member. The taxes you pay will be determined by the asset(s) overall value. It must be noted that only six states currently have an inheritance tax law in their books. These include Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. If you wish to go around this, many people will opt-in to give cash rather than assets. They will do this by placing money into trust funds or through an insurance policy.
A common concern regarding married couples is the risk of their spouse being heavily taxed after death. If the person who has passed was the breadwinner, heavy taxes could seriously compromise a person’s ability to live comfortably. Fortunately, the IRS does not tax spouses. This is called a marital deduction, but in reality, it is only a tax deferral as the funds will be taxed at the time of your spouse’s death. However, if your spouse is not a legal U.S. citizen, any funds you leave them will be taxed immediately. This is because the IRS is afraid that the spouse will quickly leave the country once they obtain that money, thus depriving the government of collecting their share.
Understanding Gift Taxes
Another area that does not get the attention it deserves is the taxes placed on gifts. There are instances where family members will gift certain items or money to a relative before their death as a means of avoiding taxes. The fact is that the IRS considers most gifts taxable, and thus you may end up placing a burden on someone instead of making their lives easier. Fortunately, there are a few ways to help them save money or entirely avoid taxes. For example, the IRS allows the donor to pay the taxes that would have been owed, thus removing that burden from your family member. In terms of avoiding taxes, the IRS exempts any gifts that are meant to pay for things such as school tuition or any medical expenses. Of course, it is always recommended to speak with your preferred attorney and accountant before making moves.