Wills, trusts, probate… What is estate planning, and why should I care?
It’s fair to say that most of us don’t want to pay any more tax than necessary. Did you know that it’s possible to owe taxes even after you die? This “estate tax” is determined based on the amount of assets you own at the time of death. This includes your home and other real estate; stocks, pension or retirement accounts, collectibles, and any liquid assets such as bonds or money in bank accounts. Once you include real estate, many people have assets over $1 million, and anything over $1 million in assets is subject to the estate tax.
There are some simple and inexpensive ways to minimize the amount of estate taxes that will be paid to the state and the federal government. For example, many couples hold the title to most (if not all) of their assets jointly, meaning that they each maintain ownership of one-half of the asset. However, if a couple divides their assets so that they each have sole title to approximately half each, this will enable each spouse to utilize his or her exemption from Minnesota (or federal as the case may be) estate taxes.
If all assets of a couple are held in joint tenancy with right of survivorship, it can be more difficult to use the estate tax exemption from the first spouse to die. If a husband and wife own $2.0 million in joint tenancy, then when the second person dies still having $2.0 million, only $1 million is excluded from Minnesota estate tax and $1 million is taxable, resulting in a tax of approximately $100,000.
However, if this same couple had divided the title to their assets equally during their lifetime, so that they individually owned $1.0 million each, the estate tax could be avoided since they would each qualify for the $1 million exclusion.
Attorney Tim Morisette says, “If you’d like to see more of your assets go to your family and less to the government when you die, contact us to make an appointment with me. I have years of experience drafting wills and estate plans. I will carefully review your situation with you and help you make planning decisions that will save you money and help you accomplish your long-term goals.”