How will President-elect Obama\u2019s plans change estate tax laws?<\/p>\n
Procrastination is one of the main reasons why people don\u2019t set up a will or trust. The problem is that change and uncertainty in life is always relevant, and some people die without transferring their assets to a beneficiary.
\nA will directs who is to receive a decedent\u2019s property at the time of death, what each person is to receive, and whether they are to receive it outright or in trust. Without a will, the state\u2019s intestacy law will make all those decisions for the deceased.
\nWills allow a person to choose who will serve as the executor of an estate, which in turn enables that executor to carry out the deceased wishes in a timely and orderly manner. Without a will, a court will appoint an administrator to perform those duties.
\nNot having a will can also allow state law to distribute a person\u2019s estate to the nearest relatives, outright, without looking any further.
\nA trust is a unique estate planning tool done prior to death. Its advantage is the avoidance of a \u201cprobate\u201d, which almost every estate must be probated, or distributed and closed through a lengthy court process.
\nTax laws play a part in both wills and trusts. By having either set up, both should help people understand what lies ahead after a death occurs.
\nAttorney at Law Edward S. Newlin, who has a practice in downtown Tyrone, has been working in law since 1970. He said that there\u2019s a split in planning in regard to how a person wants assets to go, and sometimes confusion plays a part in that will or trust process.
\n\u201cThe primary procedure for estate planning is to transfer your assets to whoever you want them to go,\u201d stated Newlin. \u201cThe second criteria is either avoidance or elimination of \u2018death taxes\u2019.\u201d
\nNewlin said that there are two types of \u201cdeath taxes\u201d, one being the Pennsylvania Inheritance Tax, and the other being the Federal Estate Tax.
\nCurrently, under President George W. Bush\u2019s administration the estate tax exemption is set at $2 million, which means a person can transfer $2 million of assets without the Internal Revenue Service (IRS) imposing an estate tax. Newlin said that figure \u201cexcludes\u201d many people, especially in the Tyrone area.
\nIn Pennsylvania, there is a \u201cgrantee tax\u201d where if someone gives somebody assets to an estate, the grantee\u2019s responsible for paying the equivalent tax on it. Newlin noted that it\u2019s a minor tax and it depends on the classification of the individual that asset is going to.
\n\u201cParent to child is four and one half percent tax, between siblings is twelve percent tax, husband and wife is exempt, charities are exempt, and anybody else is fifteen percent,\u201d added Newlin.
\nNewlin explained that there are other ways for people to transfer assets, such as a \u201cverbal transfer\u201d that can be done prior to death. If such a transfer occurs and that person is under the $2 million federal exemption, then that transfer is sufficient. A common verbal transfer would be between parent and child over real estate.
\nChanges in estate tax laws will soon have to change. In 2009, the estate tax exemption under the Bush administration will be $3.5 million and in 2010, under the Bush\u2019s tax cuts, there is no estate tax at all. But in 2011, the estate tax returns with an exemption of $1 million, which could impact more people in the Tyrone area.
\nDemocrat President-elect Barack Obama wants to change those plans. Obama\u2019s estate tax reforms will allow nearly 99 percent of U.S. taxpayers to not be subject to the estate tax, according to Jeffrey L. Condon, author of The Living Trust Advisor: Everything You Need to Know About Living Trusts.
\nCondon said that if Obama freezes the estate tax exemption at the 2009 level, the one percent of Americans with an estate exceeding $3.5 million will pay taxes upon their death.
\n\u201cHowever, for those families, there are numerous methods and plans they can capitalize upon to ensure that perhaps not one penny of their wealth will be subject to an estate tax after their deaths,\u201d said Condon. \u201cMany of those plans incorporate deferred giving to charities and non-profit corporations.\u201d
\nNewlin noted that it\u2019s nearly impossible to see what changes will occur under Obama yet. He said that Congress will have to make the decision to accept the President-elect\u2019s plans. The one thing Newlin knew for sure was that something will change by 2010, because the $1 million exemption will affect more Americans who have a house, a life insurance policy, and annuity.
\n\u201cI think it\u2019s going to boil down to what each legislature\u2019s opinion is,\u201d said Newlin. \u201cThey don\u2019t want the constituents to get angry, so they\u2019re not going to drop it to $1 million per person – everyone in the \u2018middle class\u2019 would get socked with that tax.\u201d
\nHe continued, \u201cThe taxes are based on a percentage of what your assets are, and it\u2019s like 53 percent if you\u2019re over the $2 million exemption now, which is a lot of money – it may not affect many people here, but your suburban and metropolitan areas would pay it.\u201d
\nChange will come regardless, but it shouldn\u2019t affect a person\u2019s decision to set up a will or trust. Newlin said that everyone should have some form of estate planning, and that having a \u201cPower of Attorney\u201d might be even more important than a will.
\n\u201cWhen you die, you really need somebody to look over your assets,\u201d stated Newlin. \u201cIt\u2019s to make it easier for those people who survive to avoid a lot of problems, because family members can\u2019t help you if you get sick or injured and you have assets.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
How will President-elect Obama\u2019s plans change estate tax laws? Procrastination is one of the main reasons why people don\u2019t set up a will or trust. The problem is that change and uncertainty in life is always relevant, and some people die without transferring their assets to a beneficiary. A will directs who is to receive […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,7],"tags":[],"class_list":["post-49545","post","type-post","status-publish","format-standard","hentry","category-local-news-in-the-tyrone-pennsylvania-area","category-excerpts-from-the-tyrone-daily-herald"],"_links":{"self":[{"href":"https:\/\/tyronepa.com\/index.php?rest_route=\/wp\/v2\/posts\/49545","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tyronepa.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tyronepa.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tyronepa.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/tyronepa.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=49545"}],"version-history":[{"count":0,"href":"https:\/\/tyronepa.com\/index.php?rest_route=\/wp\/v2\/posts\/49545\/revisions"}],"wp:attachment":[{"href":"https:\/\/tyronepa.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=49545"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tyronepa.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=49545"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tyronepa.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=49545"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}