Essay on Federal Estate Taxes Can Be High

1185 Words Apr 8th, 2016 5 Pages
Federal estate taxes can be high and are required to be paid within nine months after someone dies. Bob and Ann do have more than enough to pay their federal estate taxes, but their accumulated value is much greater than the exempt amount dictated by Congress. If the ranch stayed at its fair market value of $1 million and the couple had no other assets, they would not need to pay estate taxes. However, it is likely that the investments are going to be taxed and the rate after 2013 is 55%. Depending on the state that Bob and Ann live in, additional state estate taxes may require payment. My clients, Bob and Ann, are approaching the age of retirement and currently accumulating their wealth through investments and ownership of a ranch. At this current time, the couple is contemplating what options are going to effectively reduce their taxable estate to prepare for the future. A few popular options that Bob and Ann can investigate further include: putting funds into trusts and giving gifts to children and grandchildren (Understanding Estate Taxes 2016).
Bob and Ann can invest some of their estate into a qualified personal residence trust (QPRT) for the ranch in Texas. This trust allows a homeowner to give an estate as a gift to the next of kin while also allowing them to maintain ownership of the property over a designated period of time. If Bob and Ann decide to go this route with the ranch, they could give the property to their seven children as a gift, but continue owning the…

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