Whether it is fair or not, there are taxes on large asset transfers in the United States. Those who speak of unfairness point out the fact that you are transferring assets that you have left after you paid taxes throughout your life, but apparently, the tax man sees things a different way.
One tax on asset transfers is the generation-skipping transfer tax. This tax is potentially applicable on large asset transfers to family members who are more than one generation younger than you are. It can also be applied if you transfer assets to someone who is not a relative who is at least 37.5 years your junior.
Estate Tax and Gift Tax
The generation-skipping transfer tax is part of a triad of transfer taxes. There is an estate tax that could be applied after you pass away, and there is also a gift tax on large gifts that you give while you are living.
The maximum rate of the generation-skipping transfer tax, the gift tax, and the estate tax is 40 percent. This is a hefty rate that can have a significant impact on the financial future of your family.
Fortunately, everything that you are transferring is not taxable, for a couple of different reasons. There is an unlimited marital deduction. If you are legally married to an American citizen, you can transfer any amount of property to your spouse, while you are living or after you pass away, free of federal transfer taxes.
There is also a relatively significant federal transfer tax credit or exclusion that allows you to transfer a certain amount of property to others free of transfer taxes. You can transfer up to $5.43 million tax-free in 2015, but there are annual adjustments to account for inflation, so you could see a larger figure next year.
Tax Efficiency Strategies
If you are exposed to the federal transfer taxes, you can take legal steps to preserve a maximum store of wealth. There are various different types of irrevocable trusts that can provide estate tax efficiency, and there are additional tools that can be utilized as part of a wealth preservation plan.
Free Report on Federal Estate Tax
You can obtain more detailed information about the potential impact of the federal estate tax if you download our special report. This comprehensive report has been well researched, and it is written in a down-to-earth, understandable fashion.
To get your copy of the report, click this link: Estate Tax Report.
To Schedule a Free Consultation
If you are interested in the possibility of working with our firm after learning these facts, please select our “Workshops” tab to RSVP for a free estate planning workshop. At that workshop you will be offered a free one-hour consultation with an attorney: www.collinslawgroup.com/seminars/
- How to Leave Assets for Your Minor Children in Your Estate Plan - July 21, 2021
- Can a Beneficiary Sell His/Her Interest in a Trust? - July 19, 2021
- 5 Things to Consider When Creating Your Estate Plan - July 16, 2021