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Estate Planning, Probate, and Elder Law

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Welcome to our blog, where you will find more information regarding estate planning, successions and probate, wills, trusts, special needs planning, Medicaid and long-term care planning in Louisiana.

Current Status of the Estate Tax

We frequently receive questions about estate taxes aka “death taxes”. After spending a lifetime paying income taxes, you may owe Uncle Sam one more time. The federal estate tax applies when you die. Currently, U.S. citizens have an exemption of $5,490,000 (2017). Thus, if a person dies with a taxable estate valued less than this amount, no estate taxes are due. A person’s taxable estate includes the value of all of the assets owned at death, including both probate and non-probate assets. Non-probate assets include IRAs, 401k’s, other retirement accounts, annuities, and the death benefits of life insurance owned by the deceased person.

 

Because each spouse has their own exemption, married couples can double the amount of assets that pass free of estate taxes. To ensure both exemptions are available, married couples should consider a credit shelter trust or rely on portability. Portability allows a surviving spouse to use the deceased spouse’s unused applicable exclusion amount (DSUEA) for gift and estate tax purposes. The applicable exclusion amount is now equal to the sum of the basic exclusion amount of the surviving spouse and the unused applicable exclusion amount of the last deceased spouse. For example, Marie dies in 2017 with a $3 million estate and her available exemption is $5,490,000. The excess $2,490,000 can be added to her surviving spouse’s estate tax exemption. Prior to portability, the use both spouse’s applicable exclusion amount, spouses had to set up a credit shelter trust or leave assets equal to the exclusion amount to someone other than the surviving spouse. Leaving assets to someone other than the surviving spouse deprived the surviving spouse from the use of those assets. Portability allows the surviving spouse to receive the deceased spouse’s assets outright and utilize both exemption amounts without a credit shelter trust.

 

To take advantage of portability, the deceased spouse must have died after 2010, and an election must be made on an estate tax return (Form 706) to claim the deceased spouse’s unused exclusion amount. An estate tax return must be filed to make the election even if estate taxes are not due at the first spouse’s death. Form 706 must be filed within 9 months of the date of death unless an extension was granted.

 

Repeal of the estate tax is possible, but what repeal might look like is uncertain. The estate tax could be phased out over a number of years or ended immediately. It could also include a sunset provision like the last estate tax repeal. If estate taxes are repealed, the income tax basis step-up rules may be modified to limit the amount of assets that receive the step-up in basis upon death.

 

If you have questions or concerns about the applicability of federal estate taxes to your estate, or any other estate planning question, contact Houma estate and elder law attorney, John Sirois at 985-580-2520 or by email at . You can also find more information about estate taxes and estate planning in John’s book, Louisiana Retirement and Estate Planning, 2017 Edition, available by contacting John or through Amazon.com.

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