Chicago Estate Planning QuestionsWhat Should I Expect at the Initial Estate Planning Conference

The initial estate planning conference will generally take between one and two hours.  If our office is inconvenient for you to visit, our estate planning attorneys can discuss arrangements with you to meet at at an alternative, more convenient venue, such as your home. You should expect to discuss an inventory of your estate assets at the initial estate planning conference as as well as what your personal objectives and desires are in planning for your estate.  Prior to the initial estate planning conference, your should complete our firm’s estate planning questionnaire which provides our estate planning attorneys with the preliminary information necessary to address and discuss a number of important estate planning matters.  At the end of the conference, our attorneys will likely be in a position to provide you with an estimate of fees and costs associated with properly planning your estate.

What Are Estate Taxes

Estate taxes are more properly called wealth transfer taxes.  It is a tax assessed on the transfer of wealth from you to other people when you die.  There is only one estate tax bracket now (2016), that being 40%.  The estate tax applies to everything you own from cash and CDs to your home, your jewelry, surfboards, skis, vehicles, golf cart, boat, life insurance, etc.  Basically, if you own it, it is part of your estate.

What are Gift Taxes

Our system of wealth transfer taxation is very simple.  If you die with a large estate, you will certainly have to pay estate taxes.  If you give your wealth and assets away while you are living, you’re going to have to pay gift taxes.  The gift tax is designed to keep you from giving all of your wealth and assets while you are living to avoid paying the estate tax.  As a general rule, everything you give to anyone is subject to the gift tax save an important exception.  This exception is that you may give as many people as you like up to $14,000 a year.  It does not matter whether they are related to you or not.  If you are married you can give someone $28,000.

Can I Transfer Any Asset to my Spouse

Yes, if your spouse is a US citizen.  Generally speaking, since the underlying strategy in planning an estate is for each one to put their tax-free $5,000,000 (as adjusted) in the credit shelter trust (Trust B) when they die and leave the balance to their spouse, a couple must plan for what the wife will put in her Trust B is she dies first.  For this reason, it is often necessary for a husband and wife to move around estate assets as part of the estate planning process.  Typically, the husband will need to put more assets in the wife’s name so that she will have enough assets to fund her Trust B if she dies first.  Otherwise, if the wife dies first and could have set aside, in her Trust B, her tax-free $5,000,000 (as adjusted) for the children but has nothing in her name to fill her Trust B, the couple may have thrown away the wife’s tax credit – subject to portability as described below.

What Is Portability Between Spouses?

Portability is essentially where a first-to-die spouse does not use up all of his or her tax-free amount ($5,000,000 as adjusted) during lifetime or at death (the “Deceased Spousal Unused Exclusion Amount”) and the unused amount is given to the surviving spouse during his or her lifetime or at death.  If there is unbalanced ownership of assets, as noted above, electing portability upon the first-to-die spouse’s death provides a way to utilize the full $10,000,000 (as adjusted) between both spouses.

How Much Can Pass Estate Tax Free

In 2016, the answer is $5,450,000.  This amount is adjusted annually and was originally $5,000,000 in 2011 and has risen over the last four years.  Any amount over $5,450,000 is subject to a 40% estate tax rate.

Can I Make a Gift Over $14,000 in One Year

Yes.  For example, if you wanted to give your son $100,000 to purchase a business, you would write a check for $100,000.  There is potentially no income tax on the gift to him.  However, you would be required to file a gift tax return reporting your $100,000 gift.  The gift would become part of your permanent record with the IRS.  $14,000 of the fit would qualify for the annual exclusion amount and you use up $86,000 worth of your lifetime $5,000,000 (as adjusted) gift tax exclusion.