ax time is here, which often leaves people thinking about how taxes with effect their retirement and estate planning. Let’s take a closer look at some general and common questions regarding estate planning and taxes.
Gifts, Inheritance and Income Taxes
Gifts and inheritances do not count as income by IRS rules. Because they are not income, they are not subject to any of the standard income taxes your loved ones may pay on traditional earned income. If an income is made from that gift, that amount will be taxed as income.
Gift Limits and Taxes
You may give away up to five million dollars in gifts during your lifetime, tax free. The person you give the gift to may have to pay a gift tax, depending on the dollar amount of the gift. You can give gifts of up to $13,000 to an individual, family or unrelated, each year without a gift tax being imposed. This is known as the gift tax exclusion rule.
Life Insurance and IRAs
Proceeds from your life insurance and retirement accounts are part of your estate, and for tax purposes are taxed under the estate tax. In some situations, with proper planning and documentation, it may be possible to use a ByPass Trust for tax savings. Speak with a qualified estate planning attorney to see if a ByPass Trust will be beneficial for your situation.
