I am in my mid 60s and won some money in an employee pool playing the lottery. For the first time in my life, I am actually going to have some to leave my children and grandchildren other than debts. Everyone is telling me I need to worry about the state and the federal government taxing my estate. How do I go about lowering my estate tax?
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Answer: (1)
Congratulations on your win! There’s more good news: Your estate probably won’t owe estate tax after your death. For deaths in 2011, the federal government does not tax an estate unless it is worth more than $5 million; for 2012, the exempt amount is $5.12 million. And married couples can double these amounts by sharing their tax exemptions however they wish. So unless your net worth, combined with that of your spouse, gets close to $10 million, or Congress changes the estate tax law (always possible) you don't need to worry about estate tax.
Most states don’t impose their own separate estate tax, but most of the ones that do exempt estates worth less than $1 million.
If your estate might be large enough to owe estate tax, there are various ways you can lower or eliminate the bill. Under current law (effective through 2012), you can make gifts of up to $5 million without owing any gift or estate tax. Different kinds of trusts can also lower estate taxes.
If you’re concerned about taxes, talk to a lawyer experienced in handling large estates.
Posted by Mary Randolph on 08 Aug 2011