In 2013, the federal estate tax exemption will go back to $1 million per person if lawmakers don't take action. This is very important for many folks, because if you even have a modest amount of retirment savings, a home and a life insurance policy, your estate could end up being subject to estate tax liability.
Often times, I don't think folks realize how difficult that can make things on their families. If your estate is not liquid, then your family could be forced to sell assets at a deep discount just to pay these death taxes.
For example, if my spouse and I plan on leaving our home to our children after we are dead, we have to take into consideration the reality that the home will probably need to be sold at some point in time. Given real estate values though, it may make sense to sit on the home for a while until prices go up. They may choose to rent the house out for a while so they can pay the taxes and upkeep on the home. If we don't do proper estate planning ahead of time, our children may be stuck selling the property at a deep discount just to pay the estate taxes.
What if one of my kids lives at home still? Where will they go?
What if I own a business that provides a substantial amount of the income for my household. If I want my kids to be able to sell the business, or at least liquidate it without taking a loss, I need to plan ahead of time. If I don't plan ahead, I may end up leaving her and my kids with a huge tax liability.
These are very real issues that I see on a daily basis. People often assume that so long as they leave everything to their spouse, they avoid tax problems. The truth is that you can leave everything to your spouse, but without proper planning beforehand, your children may end up with a huge tax bill and potentially nothing else.
If you would like to discuss your own estate plan with an estate planning attorney in Connecticut, or if you would like to review your existing will, trust, or other estate planning document with a Connecticut wills attorney, or Connecticut trusts attorney, click here for our contact information.