Ever since it was first adopted back in 1916 a lot of people have been in favor of repealing the estate tax. They feel this way for a number of reasons. For one, the estate tax is selectively imposed and where the line is drawn varies from one year to another. So two people who pass away with the same amount of money can pay widely differing amounts. One family can be exempt from the estate tax entirely while another who died during a different year with identical resources could be asked to pay seven figures.

Another reason why the estate tax is assailed from some quarters is because it is an instance of taxing funds that remain after you already paid all sorts taxes throughout your life. Any savings that you accumulate are going to be earnings that you were able to hold onto after paying income and payroll or self-employment tax, and of course you pay sales tax, property tax, capital gains tax and any number of other taxes every step of the way. Many question why you should be taxed again for the transgression of dying.

Those that have always wanted to see the estate tax repealed were happy to see 2010 roll around. Due to provisions in the Bush era tax cuts, the estate tax was scheduled to be repealed during 2010, and throughout most of the year it was. But in December the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was passed and the estate tax came back with it carrying a $5 million exclusion and 35% maximum rate for 2012 and 2013.

In addition, it was retroactively applied to the beginning of 2010, essentially repealing the repeal. But, lawmakers recognized that a retroactive imposition of the estate tax after it was legally repealed could breed legal challenge. So personal representatives and executors can opt out of the estate tax for 2010 by filing IRS Form 8939, which is finally supposed to be available on November 15th.

This was certainly a rather difficult chronology to keep up with, especially if you are a layperson. This kind of thing underscores why it is a good idea to engage the services of an experienced estate planning attorney and keep in touch as the laws continually change.

The Law Offices of Saul Kobrick, P.C. is a member of the American Academy of Estate Planning Attorneys.

One of the most important things to ascertain when you start to get serious about planning for your future is whether your estate is going to be potentially exposed to the estate tax. This sounds like something that would be rather easy to do, but the reality is that the playing field changes on a regular basis and this leads to some rather bizarre scenarios that leave many people scratching their heads.

Let’s take a walk down memory lane for a moment. Back in 2009 the estate tax exclusion was $3.5 million and the rate of the tax was 45%. Say that John had an estate valued at $5 million and he passed away during that year. The taxable portion of his estate would be $1.5 million, so it would be taxed at 45% and his family would be liable for a $675,000 tax bill. Clearly, this is a life-changing sum of money for most people.

This year the estate tax exclusion is $5 million, and the rate of the tax is 35%. These parameters came about due to the passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. So if you were to die this year with an estate worth $5 million like the estate of John, your family wouldn’t have to pay any estate tax at all even though John’s family had to pay $675,000 on the same amount of money just two years ago.

This act is going to sunset at the end of 2012, and in 2013 the rate of estate tax is going to go up to 55% and the exclusion is going to go down to just $1 million. So if Liza was to die in 2013 with that same $5 million legacy, a 55% federal tax would be levied on the taxable portion, which is $4 million. As a result Liza’s family would have to pay the federal government $2.2 million out of that $5 million inheritance.

As you can see, with the estate tax, timing is everything. The wise course of action is to meet with your estate planning attorney regularly to make the appropriate adjustments as these changes come down the pike.

The Law Offices of Saul Kobrick, P.C. is a member of the American Academy of Estate Planning Attorneys.

There are three basic ways that you can have an ownership interest in property: individually, jointly with another person, or through contract rights.

Jointly owned property is property in which both you and another person share an ownership interest. If property is jointly owned, then when one of the owners passes away, the property goes to the other owner, without the need for probate.

Examples of joint property include joint bank accounts and real estate held as joint tenants with rights of survivorship. With this type of property, the surviving owner merely needs to present a death certificate to initiate the transfer of the account or the real estate.

The exception to this rule is property that’s held by one or more person as Tenants in Common. Under this arrangement, each owner has a designated percentage of ownership in the property instead of equal shares. For example, one can have a 60% interest, while the other has a 40% interest; or one can have a 50% interest and the other also has a 50% interest. At death, a tenant in common’s percentage of the property does not go to the other owners but is treated as his or her individual property. If there is no revocable living trust in place to distribute this asset, then this portion of the property will have to be probated, and the owner’s heirs will inherit the owner’s portion of the property.

In order to make an effective estate plan, it’s important that you know whether the property you own is held jointly or individually or as tenants in common. An estate planning attorney can help you understand your ownership interest and how to best plan to pass it on to your loved ones.

The Law Offices of Saul Kobrick, P.C. is a member of the American Academy of Estate Planning Attorneys.