Estate taxes are federal taxes imposed upon the estates of decedent’s whose worth exceeds a certain amount. Are you worried that your estate will owe taxes after your death? The best way to avoid or lower the cost of estate taxes is by reviewing your estate regularly.
Determine Your Net Worth
Calculating your net worth each year is a good idea to help determine how well your assets are doing from one year to the next. Your net worth, the sum of all of your assets minus any debts that you owe, also affects your eligibility for estate taxes. By checking frequently to see what you are worth, you can keep on top of what your estate may owe in taxes after you are gone.
Understand Your Current Tax Law
Once you know your net worth, you can use the current tax law to determine if your estate will owe taxes. At this time, however, estate tax law is in a position of change. In 2009 all estates worth more than 3.5 million dollars owed estate taxes. At the beginning of 2010 the estate tax law was repealed and no new law replaced it. If you pass away in 2010, no matter what your worth is, your family will not owe federal estate taxes. This may change if Congress decides to enact a new law before the end of the year.
In 2011, tax law will change again by reverting to the 2001 taxable level of only 1 million dollars. This much lower rate means your estate has an increased chance of owing estate taxes if you pass away.
Maintain Your Estate Plan
Since estate tax law is currently in an unusual circumstance, predicting if your estate will owe taxes is difficult. The only way to keep up with the changing laws is to pay attention and update your estate plan as needed. Your attorney can help you make changes if the 2011 exemption level will affect your estate. Each year when you calculate your net worth you should also determine if any change in estate tax law will affect you.