ESTATE TAX VS. INHERITANCE TAX

What is the difference between estate tax and inheritance tax?

Estate tax is that owed and payable by the estate.  The federal government applies an estate tax to estates over $5.43 million for 2015 (this amount is indexed and is scheduled to increase every year).  For states that impose an estate tax (most do not, including California), the residence of the decedent determines whether or not state estate tax will apply.

WHAT IS ESTATE PLANNING? (PART III – OTHER ESTATE PLANNING TOOLS)

As noted, wills and trusts are the most common estate planning tools, but are far from the only tools.  Depending on family dynamics, estate size and composition, a client may also want to engage the following.

FAMILY LIMITED PARTNERSHIPS AND LLC’S

For families that own significant assets such as rental property or operate small businesses can benefit from the use of entities such as family limited partnerships (FLPs) or family limited liability corporations (LLCs).  These entities provide several benefits for parents and subsequent generations.

WHAT EXACTLY IS ESTATE PLANNING? (PART II – WILLS AND TRUSTS)

WILLS

A Will is a document that sets forth how you want your property distributed upon your death.  It can be extremely specific (e.g., “I hereby give, devise and bequeath my personal residence and all personal property to my son Jerome, with the exceptions that all of my fine china shall go to my niece Jenny, and my yellow couch to my best friend Fifi.

WHAT EXACTLY IS ESTATE PLANNING? (PART I)

What exactly is estate planning, and who needs it?  Estate planning is primarily the process of determining how, when, and to whom you want your property to pass upon your death.  It also addresses how you want your estate to be handled when and if you lose the ability to manage it yourself (often referred to as “disability planning,” a subset of estate planning).

Good estate planning will, among other things: provide management and protection of family assets; control the management of your property and your personal financial needs when you are unable to manage your estate yourself; eliminate uncertainty regarding inheritance; ensure the continued financial health of your loved ones after you are gone; provide creditor protection to your heirs; simplify administration of your estate; avoid the high cost and time of probate; minimize applicable estate and/or inheritance taxes; define and accomplish your charitable wishes; minimize income taxes payable by your estate (which necessarily reduce the property passed on to your heirs), and; provide post-mortem control over your assets.