Financial Planning

Minimize taxes – pass on more of your estate to heirs

Assets you own or control are a part of your estate and can be taxed when you die. These types of assets can include:

  • IRAs and retirement plans
  • Life insurance
  • Investment portfolios
  • Annuities
  • Real estate
  • Other assets that have a beneficiary designation

Many people are surprised to find that when they add up their assets, they may reach an estate value threshold that qualifies them for substantial estate taxes.

Estate tax – rates and exemption levels

Estate tax may apply to your taxable estate at your death. Your taxable estate is your gross estate less allowable deductions.

Your gross estate includes the value of all property in which you had an interest at the time of death minus funeral expenses paid out of your estate, debts you owed at the time of death, any marital deduction, any charitable deductions, and the state death tax deduction.

Historical and Future Estate Tax Exemption and Rates

Year Estate Tax Exemption Top Estate Tax Rate
1997 $600,000 55%
1998 $625,000 55%
1999 $650,000 55%
2000 $675,000 55%
2001 $675,000 55%
2002 $1,000,000 50%
2003 $1,000,000 49%
2004 $1,500,000 48%
2005 $1,500,000 47%
2006 $2,000,000 46%
2007 $2,000,000 45%
2008 $2,000,000 45%
2009 $3,500,000 45%
* 2010 $5,000,000 or $0 35% or 0%
2011 $5,000,000 35%
** 2012 $5,120,000 35%
** 2013 $5,250,000 40%
** 2014 $5,340,000 40%
** 2015 $5,430,000 40%
** 2016 $5,450,000 40%

* The heirs of decendents who died in 2010 will have the choice to use the $5,000,000 estate exemption/35% estate tax rate or $0 estate tax exemption/0% estate tax rate coupled with use of the modified carryover basis rules.

** Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (TRUIJA) provides that the estate tax exemption, lifetime gift tax exemption, and generation-skipping transfer tax exemption will be indexed for inflation in 2012 and future years.

Annual Gift Tax Exclusion
$14,000
Estate Tax/Lifetime Gift/GST Exemption
2016 $5,450,000 - 40% top tax rate
Taxable Estate Tax Rate
$1 - $10,000 18%
$10,001 - $20,000 20%
$20,001 - $40,000 22%
$40,001 - $60,000 24%
$60,001 - $80,000 26%
$80,001 - $100,000 28%
$100,001 - $150,000 30%
$150,001 - $250,000 32%
$250,001 - $500,000 34%
$500,001 - $750,000 37%
$750,001 - $1,000,000 39%
$1,000,001 + 40%

Source: About.com. Wills & Estate Planning. Exemption From Federal Estate Taxes: 1997 – 2015. December 2014.

Tax services - minimize estate taxes and pass on more assets to heirs

One of the goals of many estate plans is to reduce estate taxes so that more of your estate can be passed on to your loved ones. You can use a variety of strategies to reduce your tax bill, including trusts and annual gifting.

There are also many tax issues related to your investments and tax reporting. MassMutual Trust can help you with trust tax preparation services and ongoing monitoring of any tax issues that may relate to you.

In addition, MassMutual Trust will talk with your professional advisors on any tax-related issues. We also provide the appropriate year-end tax information.