Essentials: How Estate Taxes Work

Far too many Americans have a silent partner in everything they earn and accumulate in their life. Some do not know or even realize that they have this silent partner. While others choose to ignore their partner or put off dealing with their 'partnership' situation until 'later.' In either case, without a properly written and witnessed plan in place, their silent partner stands to get paid a large percentage of everything they own when they pass away. Who is this silent partner? The federal government, of course. How does this occur? Estate Taxes. [Note-Your state government may also be in line as a silent partner too, depending on which state(s) your reside and own assets.]

"Estate Tax - The estate tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death."

Source IRS.gov

There is only one way to pass all of your assets to another person without paying estate taxes - by giving 100% of your estate to your spouse. And still, this is not an automatic assumption, proper preparation must be made to avail yourself of this benefit. If any other heirs, excluding your spouse, obtains assets from your estate, tax liabilities may be incurred. There are five significant types of taxes that your estate or your heirs may need to pay upon your passing:

• Capital gains taxes
• Federal estate taxes, (also referred to as "death taxes")
• Inheritance taxes
• State estate taxes, (depending on the laws of your state)
• Income taxes

It is critical to completely grasp what these five taxes are, particularly for minimizing the amount of taxes that will be taken out of your estate that is intended to be passed on to your heirs. You have worked a lifetime to accumulate and safeguard your hard earned assets, don't you want your heirs to receive as much as possible instead of sending an unnecessary check to Uncle Sam? It is simple, PLAN, and you keep more. Continue reading the Essentials series on http://Legacy-Lawyer.com and take the time to understand which of the above taxes might apply to you, your estate and your heirs. It also may be advisable that you speak with a qualified local tax advisor to answer your specific estate tax questions.