Married? Skirt estate-tax traps to leave more of your estate

A recent article in the Wall Street Journal gave some very useful information regarding estate tax rules and married couples.

If you’re married, you’ll want to pay attention to the new estate tax rules made by the IRS, or risk losing thousands, if not hundreds of thousands, of your wealth to taxes—money that you could have put toward the things you care about.

The IRS recently offered guidance on estate tax rules passed by Congress several years ago. The new guidance should make it easier for married couples to minimize the tax penalties to their estate.

As I’ve mentioned before (in another blog post), current estate tax rules—which will change this coming year—put the estate tax exemption for individuals at $5.2 million and couples at twice that.

The IRS updates tackle previously long-standing challenges to estate planning for couples. Since 1981, couples have been permitted to leave assets to each other tax-free at death. Before the IRS issued their guidance, couples who left all of their assets to each other lost one of their exemptions at death.

For example, if a couple had $7.5 million in assets split between them and left everything to each other, upon the death of one spouse, the surviving spouse would owe taxes on $2.5 million. This was despite the fact that each individual should have had an exemption of $5.2 million.

Now, couples leaving each other all of their assets can do so can preserve both exemptions, so long as the executor of the estate files an estate-tax return within a specific time period following the death of the first spouse—typically within nine months.

This benefit, however, doesn’t apply to individuals attempting to “pile up” exemptions from several marriages. For a remarried individual, the exemption from the deceased spouse would only apply as long as the current spouse was still living.

The IRS has also attempted to uncomplicated estate tax filing by eliminating the need for costly appraisals, as long as the assets are going to a spouse or charity. For more information on how you can leave more of your estate to your loved ones, download our Special Report today.

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