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TAXES
Upon transferring
property, either through Gifts, Wills, Trusts or via probate, you or
your survivors may have to pay some taxes.
The Federal Government
and the State of Washington have taxes on inheritance you may have to
pay.
Federal Estate Taxes
The federal government
assesses a tax based upon the net value of the deceased person's estate.
For tax purposes the estate includes all property in which the deceased
had an interest at death, and certain other property, such as some gifts
made prior to death. The proceeds of a life insurance policy owned by
the decedent are included in the net estate. A federal estate tax return
must be filed only if the total value of the deceased person's net
estate exceeds the applicable exclusion amount, which changes
periodically. When a federal estate tax return is filed, the value of
most property that passes to a surviving spouse is deducted from the
value of the estate-known as the "marital deduction," therefore reducing
the taxable estate.
A basic table with
federal estate tax exclusionary amounts for each year shown follows. If
your net estate assets are less than the amount shown for a given year,
you are likely free from Estate Tax.
WARNING! Be
sure to consult a tax attorney before filing income taxes in a year
where you may inherit property.
Estate Tax Exclusionary
Amounts
| Year/Actual Credit |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
| Estate and GST Tax
Deathtime Transfer Exemption |
$1 Million |
$1 Million |
$1.5 Million |
$1.5 Million |
$2 Million |
$2 Million |
$2 Million |
$3.5 Million |
N/A (taxes repealed) |
$1 Million |
*This is available to
each citizen. In community property states, the estate can be doubled
with no estate tax consequences if properly planned in advance.
The unlimited marital
deduction only "defers" the estate tax; it does not eliminate it. Upon
the surviving spouse's death an estate tax may be due if the estate
exceeds the applicable exclusion amount. In determining the value of the
estate, only half of the value of community property is included, while
all of the separate property is included. For married people, avoidance
or reduction of inheritance taxes by preservation of the unified credit
must occur while both parties are alive.
Washington Estate
Tax
Washington state
imposes a tax on the decedent's estate. This does not increase the total
tax liability of the estate, but gives Washington tax revenue which
otherwise would be due to the Federal government. If no federal estate
tax is due, then no Washington estate tax is due either.
Income Tax
Because an estate is a
separate taxpaying entity, federal income tax may be due from the date
of death until the date all distributions are made from the estate. The
Personal Representative of the estate may be responsible for filing a
"Fiduciary Income Tax Return" (Form 1041) depending on the amount of
income the estate receives from its assets before distributions are
made.
LIFETIME GIFTS
You have the option of
giving your property away in the form of gifts. This option may save you
money in taxes, and it may give you greater control over how your
property is distributed. Particularly with regard to children, it is a
great way to save money for college. You may also wish to put money into
a trust account so your children will have financial resources in the
event of your death. You may give up to $10,000 per recipient per year
without having to report the gift. Gifts in excess of this amount may
require a gift tax filing and will shrink your lifetime exemption which
will impact inheritance tax. Gifts also can trigger other federal and
state consequences such as ineligibility for state assisted medical or
nursing home care.
Spousal gifts
These are gifts you
give to your spouse. In making these gifts, you pay no income, gift, or
estate tax. Spousal gifts in community property states may be given on a
stepped-up basis with sufficient time. Gifts can equalize estates.
Children
You can give your
children gifts in order to lower your taxable estate. Gifts to children
are free of Federal Estate Tax within certain limits. Gifts of up to
$10,000 per child are exempt from estate tax. The limit is $20,000 if
given from both husband and wife, with spousal consent to split gifts of
separate property. Gifts of tuition or health care expenses are exempt
from $10,000 limit. Giving gifts to your children can serve as an
additional source of income through the appreciation in value of any
assets.
You can also give
children gifts in order to fund their education. There have been recent
changes in Federal Tax Laws regarding long-term funding of educational
benefits. Benefit has been eliminated under new tax law as to certain
children. Watch out for kiddy tax!
The
free information contained in these pages is not
intended to be legal advice, and does not create an attorney-client
relationship. You should always consult with an attorney before taking
any action. Feel free to contact an attorney at MOGREN, GLESSNER & ROTI,
P.S. at 425-255-4542 to schedule an appointment and discuss these issues
with you.
Our law firm is conveniently located in Renton, King County, WA, just off the freeway at the intersection of I-405 and I-167, easily accessible from Seattle and Bellevue Washington. Our
four family law and divorce attorneys represent clients in the greater Seattle area and throughout the State of Washington, including the communities of Renton, Kent, Tukwila, Seattle, Bellevue, Mercer Island, Issaquah, Fairwood,
Cascade, Newcastle, Normandy Park, Auburn, Maple Valley, Black Diamond, Skyway, Federal Way, Des Moines,
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Island, Gig Harbor, North Bend, Snoqualmie, Sammamish, Seahurst, Redondo, Enumclaw and most of south King County. Call 425-255-4542 for a free telephone consultation with an
experienced family law and divorce attorney / lawyer. Our attorneys represent both men and women in divorce
and the drafting of simple wills,
and are members of the Christian Legal Society. Our lawyers offer affordable rates
(reasonably priced) for uncontested divorce.
The free information and help contained in these
pages is not intended to be legal advice, and does not create an
attorney-client relationship. You should always consult with a lawyer before
taking any legal action. Feel free to call us at 425-255-4542 for a free
telephone consultation with a family law lawyer for help regarding your
marriage, divorce (contested or uncontested), custody, complex property division,
child support and maintenance, adoption, will, estate plan or
probate. We offer inexpensive (cheap) discount package deals and for our wills,
simple will and estate
planning documents. We offer a Christian perspective in our practice, yet
are aggressive in protecting your rights. Our attorneys are licensed to practice only in the State of Washington,
and are easily accessible to the greater Seattle area.
Serving both male and female clients in the Seattle, King County, WA area, including the communities of Kent, Renton, Tukwila, Southcenter, Seattle, Auburn, Bellevue, Mercer Island, Federal Way, Maple Valley, Des Moines, SeaTac, Burien, Fairwood,
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98038, 98040, 98045, 98168, and 98188, and area codes of 206, 253, and 425,
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