· Why should I do estate planning—don’t I have a duty to pay tax to my country?
Consider a concept called the “hand of taxation.” Count the fingers on one hand and review the following five major taxes you face:
1. Point to your thumb—you’re taxed when you earn it; that’s income tax.
2. Point to your index finger—you’re taxed when you spend it; that’s sales tax.
3. Point to your middle finger—you’re taxed just because you own certain assets; that’s called property tax.
4. Point to your ring finger—you’re taxed when you sell something that has appreciated in value; that’s called capital gain tax.
5. Point to your pinkie finger—you’re taxed when you’re through with it and want to give it away to someone you love either while you’re alive because that person needs it more than you do or after you’ve died and truly have no use for it; that’s called gift and estate tax.
Given all the taxes you pay, you may conclude that you have a duty to your family and loved ones to use every deduction and exemption Congress has given you to reduce federal estate tax.
· Can I take advantage of my applicable exclusion amount during my lifetime?
In addition to using your annual exclusion, you may also give away your assets tax-free up to the amount of your applicable exclusion amount to any one or more persons however you please. To the extent that you use your applicable exclusion amount during your lifetime, your estate will not have the benefit of it on death.
· I plan to leave my property to family members or charities on my death, but should I consider giving it to them now instead?
If you are comfortable that you will not need the property to sustain your standard of living or to meet future emergencies, you should consider this option. It will remove not only the property from your estate but, as we said earlier, the appreciation from your estate as well.
· Can I make gifts to my spouse and qualify for the unlimited marital deduction?
You have an unlimited marital deduction when making gifts to your spouse. There are no restrictions on how large these transfers can be or how often you can make them as long as your spouse is a U.S. citizen.
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