Inheritance Tax Insurance in U.S.?

[NoDecafPlz]

Ok, I know our British friends have such policies where as if Mom and Dad pass,
the policy pays for a normally hefty hit with the estate.

Does such an animal exist in the U.S. to thwart the almost 50% hit we sustain?

Joe

[carl]

Joe,
There are many many ways to get around the Federal Estate Tax starting with plain old life insurance. Right now the tax only starts at net estate of $2,000,000 (after expenses and donations) and will go up again in 2009 and then back down in 2010. The current "word" is that it will be changed permanently to $2,000,000 with an inflation kicker each year. If your family still has a problem after that see a Tax and Estate Lawyer/ Accountant to help determine whether you should consider a Trust or Insurance or whatever. Make sure to take your state estate tax into consideration too.
It's a good problem to have,
Carl

[NoDecafPlz]

Carl, thanks for the insight.

If my father were to have say, a million dollar portfolio, and then pass away.

Would my mother get hit with either estate or inheritance?

Would the estate tax be the greater concern?

Is this minimized the same way? Life insurance?

Joe

[SCI-Nurse]

Don't your parents have their assets in a trust? I can't imagine someone with those type of assets who has not set one up. Get him to a good attorney if not, and have one set up as soon as possible. Virtually all their assets can be put into the trust, which helps to avoid both probate and inheritance taxes.

(KLD)

[NoDecafPlz]

Thanks!

J.

[LaMemChose]

Trust fund.

[rfbdorf]

Aside from federal tax, there's also the state taxes, which vary considerably. For example, in some states, the surviving spouse pays no tax on the death of one. In order to avoid estate taxes, some trusts need to be in existence several years before the decease of both parents. So get on it now.
The whole business is frustrating, as it's set up by lawyers for lawyers to make money, but there doesn't seem to be any way around it.
- Richard

[carl]

Joe,
I think inheritance and estate tax are really the same thing. I believe that if your father dies first then your mother can inherit ANY amount without paying ANY Estate Tax and vice-versa, if your mother dies first.
If you are the final beneficiary then you would eventually inherit the million dollars (hopefully more as it grows) without Federal Estate Tax. (Up to 2 million dollars today)
You need to talk with an accountant or an personal tax and estate lawyer as far as the state estate taxes and other details are concerned. Do you have any friends who are accountants or lawyers? They should help you at little or no cost.
All of this is based on my understanding and you should NOT rely on it without getting professional advice. More importantly, your parents should have wills, living wills, and health care proxies, if they don't have them.
Carl

[ginamarie]

I am a certified financial planner and I can tell you that Federal Estate tax and inheritance tax are not the same thing. Inheritance tax only exists in certain states (ex. tennessee), estate tax is federal. A spouse can inherit with no limit estate tax free. If they use a trust to avoid tax then it must be set up correctly. For ex. it needs to irrevocable rather than revocable and they cannot be trustees of their own trust. They must have no incidence of ownership or all the assets can be brought back into the estate and taxed. Life Insurance is a great way to fund estate tax. An Irrevocable Life Insurance Trust (ILIT) may be the way to go. Unfortunately, one must be insurable for life insurance to work. A second to die policy can work for a couple if one of them is uninsurable. You need to work with a certified financial planner. They will work with an attorney and an accountant to satisfy your needs. Look here... www.cfp.net to find one in your area.

[NoDecafPlz]

What a wonderful state NJ is. I think this states that whatever mom and dad share jointly, when Dad dies, even though they are married, She gets hit with both Federal and State.

_________________________________________________


New Jersey collects an inheritance tax called an inheritance transfer tax. For transfer inheritance tax purposes, New Jersey’s Domestic Partnership Act applies to decedents dying on or after July 10, 2004. It exempts all transfers made by will, survivorship or contract to a surviving domestic partner. In addition to the inheritance tax, New Jersey imposes a separate estate tax which may be applicable even in cases where there no New Jersey inheritance tax is due.

The property that is taxed must be valued at $500 or more. The New Jersey transfer inheritance tax ranges from 11% to 16% and is applied to real property that was transferred.

If a decedent’s death occurs on or after January 1, 1985, property passing to a surviving spouse is entirely exempt from the tax. If a decedent’s death occurs on or after July 1, 1988, property passing to a decedent’s surviving parents, grandparents, children, stepchildren or grandchildren is entirely exempt from the tax. In addition to the inheritance tax there is an estate tax applied too.

Inheritance tax exemptions and rates may vary depending on who received the property, i.e. the decedent’s spouse may be taxed at a lower rate than would be a friend of the decedent. A number of states are phasing out their inheritance tax systems.

Those that support inheritance tax say that it is not a death tax per say but a tax on a transfer of wealth that was received upon the death of a person. Those that are against it state that the full estate, not the amount transferred, increases the effective transfer tax rate. It should be less than the value of the estate.

I just though it was important to let you know that inheritance tax in New Jersey exists and it is piggybacked along with the estate tax for the state.