Inheritance Taxes

Pay Tax on a Life Policy Payout?

One of the advantages of life insurance payouts is that they are that tax-free, right? Well, that’s often true, yet not always. It pays to know when the taxman can take a bite of your benefit.

Your tax liability for life insurance policy payouts varies widely based on your situation. Let’s look into the basic rules and a few specific cases.

Retirees: Tax-Friendly States

What states tax retirees the least? That’s something to ponder as you plan where to retire to. It’s not the predominant factor, but an important consideration.

Kiplinger’s put together an interactive map that shows tax friendliness for retirees. The magazine has links to states with no sales tax, or low sales taxes, no income tax and more.

Where Are Taxes Going?

The jockeying has begun in Washington among President Barack Obama, the Republican-controlled House and the Democratic-led Senate on taxes. How this plays out will affect us all. What should we look for?

Taxes Rising? What To Do

Your tax rates may increase drastically on Jan. 1, 2013, as the Bush tax cuts expire. You can take steps now to minimize the bigger tax bite.
This advice assumes that Congress does not act to extend the Bush cuts. The three areas that will affect Americans the most will be on income, investments and estates.
Ordinary Income Tax

Holding Down Taxes on Gifts

If you are thinking of making a substantial gift, you can save a lot of money in taxes if you act soon. The limits on what you can give tax-free may expire in January.
“It’s no secret the recipient isn’t the only one benefiting from a monetary gift,” notes Amy Jo Lauber, president of Lauber Financial Planning in Buffalo, N.Y. “True, you feel good doing something nice for someone else.” But, she adds, giving money may also reduce your gross taxable estate or transfer income-producing assets to a beneficiary in a lower tax bracket.

A Portable Estate Tax Break

Maybe you can’t take it with you, but under the Tax Relief Act of 2010, you can give it to your spouse. In this case, “it” isn’t your assets but rather the portion of your federal estate tax exemption that’s not needed to shield your property from estate tax. 
Under the old rules, any part of your exemption not used at your death was lost. Now, the exemption is “portable,” and that creates estate-planning opportunities – at least through 2012. Next year, this new tax break is scheduled to expire. 

A Home: Good Investment?

Despite record low mortgage rates, purchasers should be cautious about putting too much money into real estate. In my opinion, it’s not a great investment and seldom has been.
Owning your own home – or owning several homes – has long been the American dream.  Your home may be your castle, and even your biggest asset, but is it a good investment?  Although there are significant psychological benefits to home ownership, the hidden truth is that housing is rarely the best use of your money from a strict investment viewpoint.

Estate Planning Pitfalls

The death of singer Whitney Houston is a reminder of what can go wrong in estate planning. Many people don’t know the best ways to leave their money to others after they die.
I've seen several articles from attorneys and financial advisors about the errors in the entertainer’s estate planning. They find three areas where it was badly flawed:

Creating a Tax-Beating Trust

Should you set up a trust? Maybe you've been to a seminar where they scare the life out of you, convincing you to start one. Let’s demystify this murky but very important area.
Trusts are legal arrangements that give control of assets to a person or an institution (the trustee) for the benefit of others, such as children. Trusts can save on taxes, ease inheritance squabbles and ensure that beneficiaries are treated fairly and according to your wishes.
Let’s examine some uses of trusts:

Procrastinators’ Tax Tips

Putting off paying taxes until right before the deadline is human nature. But April 17 is looming -- the usual April 15 date falls on a Saturday this year, so they gave us a couple extra days. For those who haven’t filed yet, here are some tips from financial advisors.

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