Tax Tip of the Week
For the week of March 1, 2004

Estate taxes will take a smaller bite in 2004

Fewer estates should be exposed to estate taxes this year, and for those that are, the bite should be smaller. That's because the top rate of estate tax falls to 48% for 2004. Perhaps more important for most people, your estate can now have a value of up to $1.5 million before estate taxes begin. That's up from a $1 million exclusion last year. (Technically, lifetime taxable gifts are included with your estate for tax purposes, and there's still a $1 million exclusion for the gift portion.)

If you haven't estimated the value of your estate lately, you should go through the exercise. You might be surprised at the result. When you add investments and retirement savings to the value of your home, the total can easily approach or exceed $1.5 million. This is especially true if you live in one of the metropolitan areas where house prices have been soaring for years.

Even if your estate doesn't reach the threshold amount, you still need an up-to-date estate plan. This should include a will or other arrangements to specify who is to inherit your assets. If you have minor children, you should designate a guardian for them. You should also establish medical directives and a power-of-attorney to take effect if you're incapacitated. It's also important to make sure your beneficiary designations are up to date on IRAs and insurance policies.

For help calculating the value of your estate or to learn more about how estate taxes might affect you, please contact our office.

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