MIKE COADY

Growth Expert | Business Excellence | People Transformation
Mike Coady was appointed Chief Executive Officer of swissglobal in 2018, a position to which he brings a strong financial background and experience across a variety of roles. Mike is a skilled business strategy and growth leader, coach and motivator. He is a people’s person known for his ability to inspire teams towards excellence. He mentors his people and departments to transform their passion into outstanding results and long-lasting relationships with their clients.
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Changes to U.S. estate tax laws still call for careful planning

Mike CoadyFinancial News Changes to U.S. estate tax laws still call for careful planning

Changes to U.S. estate tax laws still call for careful planning

It is a depressing truth that many individuals are financially-savvy throughout their lives, but still end up spending most of their life savings on tax.  Frequent modifications to the estate tax laws can be bewildering, so consulting with an independent expert is highly recommended to make the most out of your wealth and leave the legacy you desire to your heirs.

So, what do the latest reforms mean?

The changes in the U.S. estate tax code over the past several years have meant that fewer families will likely face estate taxes upon their loved one’s death. Despite recent reforms, though, estate taxes are still a reality, and people with significant assets should plan accordingly.

Effective from January 1, 2014, the federal estate tax exemption was increased by $90,000 to $5,340,000.  This means that an estate of $5.34 million or less faces no federal estate taxes.  Keep in mind, estates of any size can be passed tax-free to spouses who are also U.S. citizens. The estate tax only applies to heirs who are not spouses or spouses who are not citizens.

Estates that are greater than $5.34 million face estate taxes on the excess amount. The highest estate tax band is currently 40 percent.  While that may seem high, the rate was 55 percent as recently as five years ago.

Another new twist in 2014’s estate tax code is the introduction of combined estate tax exemptions for spouses.  The combined exemption allows a surviving spouse to use both spouses’ exemptions.  For example, assume one spouse dies and leaves his entire estate to his wife.  Because unlimited transfers are allowed between spouses, no estate tax exemption was used. That means that upon the death of the second spouse, the estate can use both spouses’ exemptions for a total exempt amount of $10.68 million.

Effectively, married couples will be able to pass up to $10.68 million to their heirs tax-free upon the second spouse’s death. That provision eliminates estate tax concerns for a large number of citizens.

For those individuals and couples who still may face estate taxes, there are some effective planning techniques available.  One is to give assets away before death. The tax law allows for up to $14,000 in tax-free gifts per recipient every year.  An individual with three children could give $14,000 to each child and thus remove $42,000 from his or her estate.

Gift splitting is a popular planning mechanism for married couples. Under gift splitting, each spouse gives up to $14,000 to each recipient.  So a married couple with three children could give $28,000 to each child, or $14,000 from each parent. That would remove a total of $84,000 from the estate every year.

There are a variety of other planning techniques that one could use to reduce an estate tax liability, including the use of charitable donations, trusts and life insurance.  An experienced financial advisor could help you examine your estate, estimate any potential estate taxes, and develop a plan of action to transfer assets to your heirs with as little tax consequence as possible.

Consulting a specialist financial advisor on the issue of changing estate taxes is highly recommended.  deVere Group has qualified wealth management professionals in this field who will work with you to evaluate the various options available with regards to your personal situation.  By taking action and understanding the complexities surrounding estate tax, you could save a significant sum, and ensure that more of your hard-earned savings go to your loved ones.

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