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ASSETS INCLUDED IN YOUR TAXABLE ESTATEBANK ACCOUNTS LIFE INSURANCEREAL ESTATEBUSINESS INTERESTSSTOCKS & BONDSIRA''s & PENSIONSPERSONAL PROPERTYCERTIFICATES OF DEPOSITIf your net estate (assets less debts) is more than the exempt amount, federal estate taxes must be paid starting at 37% and run as high as 55%. free online income tax filing Free online income tax filing. UNIFIED ESTATE & GIFT TAXOne of the most important concepts of federal estate and gift tax is that both taxes work in a unified law. Gifts made during a person''s lifetime or property transferred on death are subject to a single graduated tax schedule. This tax begins at 18% for taxable gifts in excess of $10,000 per year and increases to 37% on amounts over $675,000 and finally to 55% on total gifts and bequests of more than $3 million. free online income tax filing Tax evasion. The unified credit of up to $675,000 may be used on lifetime gifts or bequests at death. ANNUAL GIFT TAX EXCLUSIONDuring a person''s lifetime, gifts of up to $10,000 a year may be given to as many individuals as he or she wants and will produce no gift tax whatsoever. There is no need to even file a gift tax return. free online income tax filing Irs codes. Gifts of any amount may be made between husband and wife without a tax. Gifts by a husband and wife to a third party (split gifts) are treated as if half the gift was given by each spouse. Married couples may then give an unlimited number of $20,000. 00 gifts per year without paying gift tax. Please note the $10,000 per year gift exclusion will be adjusted for inflation beginning in 1999. UNIFIED CREDITIn addition to the annual exclusion of $10,000, federal estate and gift tax credits are available for each person. This system is called the "unified credit" and is calculated on amounts in excess of an annual exclusion ($10,000) up to a lifetime/death total, which in the year 1999 equals $675,000. 00. The tax on a transfer of $675,000. 00 exactly matches the maximum unified credit available to offset the tax. Long story short, a person who dies in the year 1999 with an estate of $675,000. 00 may leave it to anyone free of tax. All amounts over $675,000 are subject to estate tax starting at 37%. This amount of unified credit will go up each year as follows:Year2000-20012002-2003200420052006 and laterUnified CreditExclusion Equivalent$675,000$700,000$850,000$950,000$1 millionMARITAL DEDUCTIONThere is a special unlimited deduction for transfers between husband and wife. In other words, spouses may give an unlimitedamount of property to each other in life or on death without paying any estate or gift tax. A slight twist on the marital deduction on death is a special trust called the qualified terminal interest property or "QTIP trust" which pays to the surviving spouse all current income and principal to maintain a standard of living. The QTIP trust is a powerful instrument in sophisticated estate planning and is often used to defer tax on first death but insures that certain assets go on second death to a specific group of beneficiaries such as your family. GENERATION-SKIPPING TAXIn addition to federal estate and gift tax, a special tax is imposed on transfers that bypass one or more generations. This generation-skipping transfer tax is imposed on gifts and bequests to individuals in a second or subsequent generation (grandchildren, for instance).
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