Estate Taxes….Disappearing?

The estate tax. Now for those of you who don’t understand it, no one can blame you. It is a complicated series of equations taking into account what you own, subtracting your debts and such, and then adding back in your taxable gifts. (For a full explanation, visit the Estate Tax section of the IRS website.) Not so much fun for those of us set to inherit money. You get this lovely surprise at a difficult time and the government wants to come in and take away a chunk of your loved one’s hard earned wealth. Well…not for long.

How the government arrives at this number is not what I am here to talk about. What I am here to discuss is the upcoming change in the law. This is most important for families who may have a loved one close to the end of their life. The federal estate-tax exclusion is slated to increase as of January 1, 2009 from 2 million to 3.5 million dollars. Now what does this mean? Basically, if your ailing loved one remains with you until the first of the year, those families who are set to inherit less than $3.5 million will be exempt from the estate taxes.

And just wait until 2010! That is the year that the federal estate tax is said to disappear entirely…or at least until 2011. So wealthy benefactors, hang in there. You could save your family a lot.