For the elderly who have assets in the $1,000,000 to $5,000,000 million range, you should consider selling your house before the end of this year.

The death tax (a.k.a., the federal estate tax) is a tax applied to the transfer of a person’s assets at death. It is defined by the Internal Revenue Service as “a tax on your right to transfer property at your death.”

Under current law, the tax is temporarily set at the rate of 35 percent with an exemption of $5 million. On January 1, 2013 the estate tax is set to return at a top marginal rate of 55 percent (with an additional 5% surtax for certain estates) on all assets above a $1 million exemption amount.

Everything a person has of any value counts towards the death tax exemption.  This means your car, home, stocks, bonds, bank accounts all are totaled together to calculate if you owe the estate tax.  Starting January 1, 2013, under current law, if your total estate is over $1 million, you will owe taxes at a 55% rate. Think about all the assets you own:

  • personal property (such as a home, cars, furniture, artwork)
  • business assets (property, machinery and inventory)
  • investments (stocks, bonds and real estate)

Now think about how much that is worth – these days, it doesn’t take much to push you over the $1 dollar exemption, after which all additional assets are taxed at a 55% rate.  It is easy to see why nearly 70% of voters want the death tax repealed permanently. The estate tax doesn’t just affect millionaires and billionaires, it affects everyday people and America’s main job creating engine – family businesses.

For any assets valued over the exemption, the people who inherit the farm, business, or property will owe the tax within nine months of the decedent’s death.  For those family businesses that are forced to take out a loan to keep the business running, their tax rate becomes the tax paid, plus the interest owed on the loan.

http://www.irs.gov/businesses/small/article/0,,id=164871,00.html

 

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