They say the only thing certain are death and taxes. So what if you just combine them and be done with it? That’s what some people will most certainly do in this crazy age of uncertain taxes. The current estate and gift tax changes are set to expire at the end of this year. This will cause the tax to go back to where it was in 2001 (think higher rates and lower exemptions).
The good news is that if you die in the next few days, your estate pays NO estate tax. I know it is unpleasant to consider, but don’t think that families with people that are on life support aren’t having conversations right now. It truly is pathetic that our tax laws cause such conversations, but we’re talking about some potentially large dollars here. Let’s say grandmother has a $2 million dollar estate and is clinging to life. Die today, and pay $0, or die January 1st, and pay $450,000. Talk about putting a dollar value on a person’s dying days!
So what about the rest of us that aren’t on death’s door? Although politically there is a consensus that the $1 million dollar estate tax exemption needs to be raised, and there is support for a bill, the issue is way down on the list of priorities. It is very possible that Congress will not act, and leave many modest estates subject to the tax. The best advice is to review your plan with your attorney and financial advisor.
One option that lawmakers are considering is the removal of the “step-up” in basis. This provision allows the estate to revalue the assets at the time of the individual’s death. Generally, this allows the heirs to sell the assets shortly after death with little income tax consequence. This removal of the “step up” in basis would result in no tax to the estate, but the heirs inherit the original basis of the asset. For those with family farms and another real estate, this could be a huge income tax bill when the asset is sold. Of course, you could just save your family the hassle and die now.
The IRS states that there are over $164 million in undelivered refund checks for almost 112,000 taxpayers. I know some of these people are in federal witness protection, but still, it might be worth looking.
Our experts can help you with any of you bookkeeping, payroll or tax needs, so contact our offices in Oklahoma City: 405-288-1209 or Tulsa: 918-209-3441 to get the help you need.