MAIL
GIFTS AT DEATH
Most people still think about gifts to charities when they die. If the total net estate is under $675,000 (all future reference to estate will refer to net estate), then no federal estate tax is due and the gift is simply a "nice gesture" for charitable purposes. (any comments to tax refers to federal estate tax only unless otherwise stated).
However, once an estate is larger than $675,000- say $750,000- then the gift
not only has altruistic implications but can also reduce the taxable estate.
(It is important to recognize that estate tax STARTS at 37% for net estates
over $675,000 and goes as high as 55%).
So, for the above example, we'll say that $100,000 was gifted to a recognized charity upon death. That is a deduction from the net estate which would bring it down to $675,000. Hence there will be no estate tax. Had the net estate remained at $750,000, then the federal estate tax would have been $27,800 and is generated by the 37% rate on the additional $75,000 estate over $675,000. Remember this though before you give away the $100,000 to charity. If you had a beneficiary, they now have been disinherited of the $100,000. If the assets were given to them, the net amount retained would have been $72,700 ($100,000- $27,800). In essence, make sure your gift to charity is worth more to you and the charity than the $72,700 would be to your beneficiaries.