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Death Tax Basics
By Mary Claire Allvine

How a parent's death will affect your life

Your estate is not subject to federal estate tax at your death unless the value of your gross estate is greater than $2 million. A couple can therefore plan to pass as much as $4 million at death to their children without paying transfer taxes. Up to $1 million per donor can be given away tax-free during life.

 

You may also give up to $12,000 annually to an unlimited number of people without gift tax.

 

You may pay an unlimited amount of medical and tuition expenses without incurring a gift tax if you make the payments directly to the service provider.

 

For certain assets, such as life insurance or an IRA, if you've named one person as the beneficiary on the asset and a different person in your will, the designated beneficiary on the asset takes precedence.

 

Your basic estate planning document should include a will, a power of attorney for healthcare, a financial power of attorney and a review of your beneficiary designations. Wills and powers of attorney are state-specific, so be sure to consult with an estate planning professional as soon as you move to another state.

 

You should have a will even if your estate is not taxable because a will simplifies probate (the process by which your assets are distributed after your death) and allows you to name a guardian for your minor children. Even single people need a will: without one, the decedent's state of residency will decide how assets will pass at death. Some states return assets to parents; others distribute among siblings; some do both.

 

Life insurance may be part of your estate for estate tax purposes, even if the proceeds pass to a beneficiary free of income tax.

 

Source: Stevie Casteel, King & Spalding, LLC