Call: (414) 427-6181

5200 W. Loomis Rd., Greendale, WI 53129

georgia@konstantakislaw.com

Office Hours: M-F 9:00am - 5:00pm

Konstantakis Law

Personalized Strategy. Proven Solutions.
Logo for Attorney Georgia Konstantakis Milwaukee area personal injury, car accident, DUI, traffic violation, divorce, estate planning lawyer

Do Recent Changes in the Federal Estate Tax Code Apply to Me?

If you pass away in the 2016 tax year and if all your assets are less than 5.45 million dollars, your estate will be eligible for a federal estate tax exemption. This portion of the federal tax code can be said to be the most progressive as it only burdens those who can afford to pay these taxes.  The federal estate tax rate charges your estate 40% of any assets over 5.45 million dollars (which only affect 2 out of every 100,000 households). So for example, if your estate is worth 10.45 million dollars and you have not done any estate planning to shelter your estate from federal estate taxes,  the taxes owed by the estate will be calculated as follows:

$10.45 million-5.45 million= 5 million 
 will be taxed at 40%=
2 million in taxes owed to Uncle Sam
But just wait, there are ways around this…

You can avoid this tax with proper estate planning and filing certain tax forms at the right time.  Fortunately, Wisconsin has eliminated the estate, death, and inheritance taxes. The tax system used in Wisconsin is commonly known as a “pick up” tax system, meaning the state of Wisconsin picks up all or a portion of the credit allotted on the federal estate tax return. Under Wisconsin law, provided the value of your estate is less than 5.45 million dollars, your spouse or your donation to a non-profit charity will be entitled to the full worth of your estate without the burden of federal, estate, inheritance, or death taxes. Married couples can take advantage of what is known as Portability.  This ensures federal exemptions between married couples and entitles them to double their exemption for purposes of avoiding the federal estate tax as long as the deceased spouse has not made taxable gifts during his/her lifetime.  If the deceased spouse has made taxable gifts during his/her lifetime, then the exclusion amount is lowered by the number of taxable gifts made during the lifetime of the deceased spouse.

The federal estate exemption was 5 million in 2010, however due to inflation this number has risen to 5.45 million in 2016.  It is important to note that the spouse who wants to take advantage of  portability must fileForm 709 of the Federal Estate Tax Return within nine of months of death regardless of whether any tax is owed. This is to ensure the surviving spouse can claim the entire exemption. If the 709 Estate Tax Return Form is not filed, portability may be unavailable.

The good news is……there are ways to gift your money while you are living. Per the Internal Revenue Service, the gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. This tax applies whether the donor intends the transfer to be a gift or not.  The annual gift tax exclusion for single parties allows for a $14,000  gift to any one person during the year, without triggering gift taxes.  In other words, you can give away as much of your money as you want tax-free, as long as you don’t give more than $14,000 to any one person during the year.  In one’s lifetime, the basic gift tax exclusion allows for 5.45 million in gift expenditure. This means any gift expenditures past the annual exclusion limit, but less than 5.45 million, will be non-taxable.

So what can be excluded from gifts?
Gifts not more than annual exclusion
Tuition or medical expenses you’ve paid for someone else
Gifts to political organizations for their use
Gifts to spouse

Exceeding the 5.45 million gift tax exemption allows for federal taxation of up to 40%, which limits taxation only to those who can truly afford it. Clients often ask why does the IRS tax the wealthy?  The federal estate tax is crucial, as the money collected allows for funding to essential programs, from education to health care to national defense.  If the estate tax were further weakened or even annulled, other taxpayers would take on the weight for these programs, face cuts in the benefits and services, or face a higher national debt.

What can Konstantakis Law Office do for you?


Wills
A will is a document which expresses one’s “testamentary intent.” In simple terms, a will sets forth how one wishes to leave his or her property, and on what terms, upon death.
Trusts
A trust is a contract that usually sets forth who will manage one’s assets, be in charge of seeing that bills are paid, and how distribution of one’s property is to take place upon death to your beneficiaries.
Durable Power of Attorney for Financial Documents
Simple and reliable way to arrange for someone you trust to care for your finances given a scenario where you are incapacitated.
Advanced Directive Health Care Documents
Living Will documents your wishes regarding medical treatment at the end of life. A Healthcare  Power of Attorney allows you to choose someone that you trust to make healthcare decisions for you given a scenario in which you are incapacitated.
HIPAA Privacy Authorization Form
The HIPAA release form allows a trusted individual of your choice to obtain your medical information from a health care provider. Without filing a HIPAA release form, your health care provider will be unable to provide your medical information to anyone, even your spouse or close family.y members.

At Konstantakis Law Office, it is our fiduciary duty and honor to plan and care for your estate. As your legal representative, we will prepare crucial documents that will accurately reflect your testamentary wishes and protect your family’s future. We will use our knowledge of Wisconsin law to protect your assets until they are distributed to heirs of your choosing. This can take the form of deciding allotments of money, real estate, and securities owned by the decedent. Our firm will also determine whether probate court proceedings are needed. While most clients’ assets are non-probatable, it is important to have an experienced attorney capable of streamlining the probate process. Seeking expert legal advice and establishing an Estate plan is essential to ensuring you and your family are prepared for the unexpected. 

Leave a Reply

Click to Request A Consultation