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An Overview of Estate Taxes

An Estate is a taxable entity that comes into existence after the death of a taxpayer. It includes all of his or her assets including property and personal effects. It remains in existence until the assets are distributed to his or her beneficiaries, heirs or other claimants. The assets are to be distributed according to the taxpayers will or a court ruling if there is no will.

The Estate Tax is a tax imposed on the right to transfer property by inheritance and assessed on the net value of a decedent's estate before distribution to the heirs. It is sometime referred to as the death tax.

The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death. The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.

The task of valuing your estate will be left to the executor of your will. If you formed a living trust, the duties will be performed by the trustee. The executor or trustee might have to call in certain appraiser professionals for help. A real estate broker or appraiser might be used to value your home. The Internal Revenue Service requires that all estates be valued at the time of a taxpayer's death in order to determine whether any estate taxes are due. [Read More]

An Overview of Trusts and Wills

A trust is a relationship whereby property such as real or personal, tangible or intangible is held by one party for the benefit of another. A trust arises when property is transferred by one party to be held by another party for the benefit of a third party.

Trusts frequently appear in wills. The administration of every deceased's estate is a form of trust. A fairly conventional will, often leaves assets to the deceased's spouse and then to the children equally. If the children are under 18, or under some other age mentioned in the will, a trust will come into existence until the contingency age is reached. The executor of the will is the trustee, and the children are the beneficiaries. The trustee will have powers to assist the beneficiaries during their minority.

The trust is governed by the terms under which it was created. The terms of the trust are usually written down in a trust instrument or deed. The terms of the trust must specify what property is to be transferred into the trust, and who the beneficiaries will be of that trust. It may also set out the detailed powers and duties of the trustees such as powers of investment, powers to vary the interests of the beneficiaries, and powers to appoint new trustees. The trust is also governed by local law. The trustee is obliged to administer the trust in accordance with both the terms of the trust and the governing law.

A trust involves three parties: you as the creator, the trustee or trustees who agree to manage your assets as directed by the terms of the trust, and the beneficiaries.

You will probably want to name yourself and your spouse as trustees, because you want full control of the property while you're alive. As trustee, you will have the power to wheel and deal with your assets—sell them, exchange them, invest them, do whatever you want with them. [Read More]
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