Death Tax

Posted by Rie Umano

No matter how rich or poor you are, you cannot avoid death. It is very important to start planning you estate as early as possible. Many states impose their own taxes when residents die. Those taxes can hurt family-owned business, or can be minimized by some strategies by planning correctly. Here is six steps to estate planning.
Step 1: financial plan and your estate
Establish how much you own (assets), how you much you owe (liability), tax commitment at death and the amount of life assurance.
Step 2: Drawing up a will
Your will ensures that your assets will be divided among your relatives that you want to give. Your will have to be revised when your personal circumstances changes, such as marriage, having a child or your spouse dies. In addition, your income and new tax legislation and amendments to existing laws will affect your will.
Step 3: Liquidity of your estate
The liquidity of your estate is important because your spouse needs enough cash to support themselves until your estate are settled. Cash can be used for your funeral fee, bank charges, or transfer costs on houses and other property.
Step 4: Taxation at death
Some states have their own tax system that is different from the federal estate tax system. Your estate may also be liable for income tax. There are also some exemption and deduction and retirement fund benefits.
Step 5: Structuring your estate
As mentioned above, there are ways to minimize death tax such as donations, balancing an estate, limited interest structures, and massing.
Also, you should consider the fact that life insurance that you purchased increase inheritance taxes depending on the amount of liquid assets you own. It is more important to keep sufficient assets to pay death taxes.
Step 6: Getting it all together
Organize all your documents and store them in a place where your heirs and executors will be able to access.

Sources:
http://www.persfin.co.za/index.php?fArticleId=2495519&fSectionId=706&fSetId=300
http://articles.moneycentral.msn.com/RetirementandWills/PlanYourEstate/TheDeathTaxIsFarFromDead.aspx
http://www.ehow.com/how_2075665_minimize-state-death-taxes.html