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DuPage County estate planning lawyer, well-formulated estate plan, estate tax, federal estate tax, death tax, business estate planA well-formulated estate plan gives estate owners peace of mind knowing their assets and funds are going to the right place. One reason why it is important to develop an estate plan is to potentially reduce or eliminate federal estate taxes, also known as the "death tax." Calculated at 40 percent, these taxes not only diminish funds from loved ones but they can also severely impact a private company.

According to an article in Forbes, an estate is only subject to federal estate tax if it is valued at more than $5.34 million. Moreover, there is a marital exemption. If you are married, you and your partner will not have to pay federal estate taxes unless your combined estate is valued at more than $10.6 million. Although these limits mean most Americans will not need to pay estate tax, those who do could see a substantial loss in wealth. If a business is owned, there are a number of other criteria, including death or retirement of the key asset holder, that can affect a business's equity before estate tax comes into effect. Understanding these factors can put a person in a position to keep these taxes low.

In addition, Forbes contributor Steve Parrish notes that business owners may also face the challenge of not having "sufficient liquidity to carry the estate through to distribution to the beneficiaries." Creditors may need paid off or lost revenue may need supplemented. However, this can be avoided by having an estate plan that is sufficient in funds. A well-formulated estate plan considers all factors "that can challenge the successful transfer of wealth, including the estate tax," states Parrish.

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resident alien, Illinois estate planning lawyer, estate planning, estate tax, Standard estate planning tax advice might not work for situations in which one or both spouses are resident aliens. The term resident alien is used by the U.S. government to describe non-citizens who are permanent U.S. residents, and it could be beneficial for those in this circumstance to get some guidance from an estate planning attorney.

Under federal tax law, resident aliens and American citizens are governed by the same estate tax rules. In cases where the taxable estate assets are above $5.34 million, the IRS will want 40% of those excess funds. With careful planning, the implications of the federal estate tax can be avoided or minimized.

U.S. citizens are eligible to take advantage of the unlimited marital deduction, which allows for as many tax-free transfers to your spouse during your lifetime as you would like. Unfortunately, non-citizen spouses can't take advantage of this program. This can be a big hit when it comes to the estate tax, since the IRS will always want to go after 40% of the excess.

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If you have property or assets that you want to leave to your heirs, then you have several options.  A trust can shield these assets from taxation and also probate.  It allows you to protect your legacy and control your wealth.  They are essential to good estate planning so it is important to know what they can do.

There are two types of trusts.  The first is a living trust, which is called that because it is active during the grantors lifetime.  A living trust can either be revocable or irrevocable.  A revocable trust can be changed at any time in the grantor's lifetime.  If a relationship, circumstances or your intentions change then it is not an issue.  But while it does avoid probate, a revocable trust is subject to estate taxes.

An irrevocable trust is the opposite.  It immediately transfers your effects out of your estate and into a separate legal entity. There is no way to change your mind or use these assets because they are not yours anymore.  Benefits of an irrevocable trust is that it can avoid probate and estate taxes.

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Posted on in Beneficiaries

Since the holidays are right around the corner, there are some things that you should start to consider for planning your estate. One reason to plan now is that laws will change on January 1, 2014, and certain trusts can allow you to leave assets to your loved ones without being lessened by taxes. To make the most of your hard work, make sure you take the time to complete your estate plan.

Starting in 2014, the federal tax free limit that people can transfer to successors will increase. The gift tax will is also set to increase. There are also many different tax breaks or exclusions that will change beginning next year. This is a good time to begin or review your personal estate plan with a checklist.

It is important to elect someone who will act in your best interest if you are unable to. If your health could be an issue in the future, nominate someone to have health care power of attorney and amend your living will, which will provide them with a guide. You can also elect a financial power of attorney, a guardian for any minor children and an executor of your last wishes.

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The term "estate planning" throws some people off because of its association with the very wealthy. Yet estate planning is just as important for families without large financial reserves. According to CNN Money, "such a plan ensures that your family and financial goals are met after you die"—and that's something every family can get behind. CNN Money cites that an estate plan is made up of three major elements: a will, the choosing of a power of attorney, and a living will (sometimes called a medical power of attorney). Every person's estate plan will be different, depending on individual needs, and this is why it's important to work with a qualified attorney to find out what's best for you and your family.

Sometimes a trust, "legal mechanisms that let you put conditions on how and when your assets will be distributed upon your death," is an important addition to estate planning because they allow the reduction of your estate and gift taxes. Trustees will exact the trust. According to the Illinois Trusts and Trustees Act, a trustee can be "appointed by or pursuant to the instrument creating the trust, by order of court or otherwise, and includes an individual and a corporation qualified to administer trusts in this State." The trustee will have access to all processes regarding the estate and estate plan, upon death or incapacitation of the trust's owner.

In the beginning of 2013, the federal estate tax exemption—"the amount you may leave to heirs free of federal tax," reports CNN Money—was changed to $5.25 million. Inheritances over $5.25 million are taxed heavily, at 40 percent. To avoid this heavy tax, the wealthy can reduce an estate while they are still living by gifting small chunks of it to their beneficiaries. The tax-free gift amount one is allowed to give to an individual annually is $14,000. This means a person and his or her spouse can give up to $28,000 annually to a beneficiary. "You may also pay an unlimited amount of medical and education bills for someone if you pay the expenses directly to the institutions where they were incurred," according to CNN Money.

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