On January 1, 2006, as planned in the 2001 estate tax law, the amount one person can leave to heirs without estate tax will increase to $2 million. Although this amount is slated to increase again to $3.5 million in 2009 and to infinity in 2010, it returns to $1 million in 2011.
Add up all your net worth (your house’s value minus your mortgage balance, add your 401(k)s and annuities, and all other assets; subtract any debts). Then add any life insurance benefits that would be paid upon your death. If you are married, include your joint assets and any separate assets either one of you has. If this amount is greater than $2 million, your children or other loved ones may see half of their inheritance sent to the IRS.
The good news is that the estate tax is a voluntary tax. It’s a tax for people who don’t bother to do any planning. For our firm’s clients, we present a wide array of planning tools, many with extra advantages, like asset protection.
For married clients who have created foundational plans with our firm, as of January 1, they will be able to pass up to $4 million dollars to beneficiaries estate-tax free. For single clients, amounts up to $2 million will pass estate-tax free.
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