Savings Strategy

Author: Kris Koonar

The word 'Tax' raises brows as nobody loves to pay taxes; each one keeps finding ways to evade it. Estate taxes are the most frowned upon and avoided tax payment as it eats away a substantial amount of the estate if you don't initiate necessary steps. Estate tax planning should be done once you acquire a property above two million dollars, as this is the current limit up to which no estate tax is applicable. In case you avoid it then your beneficiaries or your heir may have to shell out 45 cents on every dollar of your estate value. There are chances that the excluding tax limit may increase by 2009.

Initially you may feel that your estate is not big enough for paying estate tax, but you may be surprised at the number of people, who own properties beyond the exemption limit even after considering life insurance death benefits, saving on 401(K) etc. If this is the situation you are facing, then you should ensure that your loved ones get the maximum from the property that you have saved for them. So implement some simple estate tax saving strategies and let them enjoy the fruit of your hard labor instead of it going into the government treasury.

. Life insurance proceeds are subjected to estate tax. Set up an irrevocable life insurance trust that can own your policies. This strategy saves you from paying estate tax. However if you wish to transfer any existing policy to the trust then you would be liable to pay estate tax for the next three years from the date of transfer.

. Marriage can also save you from tax deduction. You can transfer your estate to your spouse name and save on tax, this is called marital deduction and this leaves you free to leave up to $1 million for your grandchildren or to others without shelling out a single penny as gift tax. You can leave a legacy behind which can amount to $2 million by taking advantage of the tax exemption limit. The theory behind this tax code is that the wealth should be treated equally among married couples.

But this marital deduction is not considered permanent; it just postpones it. On the death of a spouse, the surviving spouse has to pay estate tax to the level that he or she retained the property until death.

. You are permitted to shell out an unlimited amount during your lifetime as education fees or for medical expenses not covered under insurance. This payment should be made directly to the institution. These payments are exempted from tax and it does not affect your $1million gift tax exemption. You can give an additional gift to your ward of around $12,000 towards books, or other expenses without paying tax. If your spouse is under the tax bracket then he or she is also eligible to get such privileges.

. Married couples, who pay taxes are entitled to estate tax exemption of about $2million individually, which amounts to about $4million! Even though in this case the property passes through tax exemption during the initial stages, later on the death of a spouse, one part becomes taxable.

About the Author:

Sacramento CPA Firm Murray and Young offer Tax Representation by a former IRS auditor. For useful articles and tips by Sacramento Estate Tax Planners, please visit our website at http://www.april15.com.

Article Source: ArticlesBase.com - Estate Tax Saving Strategies

If you expect to make your dreams come true, whatever they might be, you need to first be wiling to adopt proven savings strategies. The first and most important of these is that of setting a goal and developing a plan to reach it. It isn't important what the goal it, but it must be something that you really want and cannot afford out of simply the paycheck you earn. It should be something that is reachable or you will become frustrated and give up on it. That doesn't mean that if your dream is to live in a mansion and own several luxury cars you should give it up. No, of course you should never give up on your dreams nor should you allow anyone else to steal them from you, but as you begin your adult life, you have to set goals that are obtainable within a reasonable period of time and build on those.

Of course, some of you are now asking what is meant by setting small goals that are obtainable instead of going for the rainbow. Simply put, it means that you take something small that you really want and start with that. Let us assume for the moment that you live in Massachusetts and have a friend from your old hometown who now lives in Florida. You have a one-week vacation that is already scheduled six months in the future, and you'd like to use that to visit your friend. You can do that no matter what your income level with just some careful planning. First, you have to figure the time of year you are traveling - keep in mind that if you are flying, the summer months are going to be the most expensive. If possible, you might want to think of taking your vacation in the spring or fall instead when you can pay off-season rates on both the airplane and accommodations in the event your friend is unable to accommodate you during your stay. 

Once you know how much the trip is going to cost you, the next step is to develop a plan for saving the money. The best way to do this if it is offered is have money deducted from your paycheck and deposited into a savings account. The reason this option is so often suggested is because we are conditioned to having so many things deducted from our pay such as taxes, insurance, retirement plans, and the like, that a few more dollars would not be noticed, AND we don't miss what we don't see. It seems impossible for the average person to save $20 a week out of their pay, yet if that same $20 is deducted from their paycheck, they find a way to live without it. Doing this may mean you have to sacrifice some things, but that is the purpose of goal setting: to reach a goal by using whatever means you need to use in order to achieve the culmination of that goal. 

Once you have started with your little goals such as your trip to visit your friend, you can move on to bigger things. Starting with small goals allows you the opportunity to see that it can be done with the right plan, whereas starting with a big goal such as buying that mansion by the sea will only make you frustrated as you try to achieve something that at the beginning is not obtainable. It's just like a diet: you don't lose twenty pounds all at once, but you do it in steps. Beginning small and working your way to the top rung of the ladder is going to get you there smoother than if you tried to do it all at once. 

Source: http://www.articlecircle.com/ - Free Articles Directory 

About the Author
Richard Callaby is a Independent Computer Consultant, Writer, Author, Speaker and Instructor. More articles from this author and many other authors on personal finance can be reached at http://www.econtentking.com/Category/Finance/6.