Estate tax takes many by surprise |

Estate tax takes many by surprise

Susan Wood

It’s no wonder Congress debates the estate tax so much. The high tax that goes into effect when an immediate family member or parent dies can change the lives of heirs at a difficult time.

Financial advisers say estate heirs find themselves dealing with more than a loss of a loved one. They’re also facing a high tax bill when their parents’ property is assessed. In dealing with estates, many heirs not only discover their parents sat on a gold mine, but that Uncle Sam wants a big piece of it.

Many of those who acquired their parents estates are forced to sell the land, home and other assets to have the necessary money to pay the estate taxes – which is due within nine months after the transfer of property. That’s when the IRS clock ticks on interest and penalties.

Property values have risen in the double digits in Northern Nevada over the last seven years. “That’s why we see so many estate sales up here. And if the heirs have an auction, that’s a fire sale situation,” Brookstreet Securities financial adviser Cheryl Sillings said of an urgent way to get money quick.

The same thing appears to be happening in agriculture-rich Carson Valley, according to Ron Bankofier of Edward Jones.

“The majority of the wealth is in the land,” Bankofier said. “You can tell when families don’t do estate planning. You see the ‘for sale’ signs go up. The kids need to raise money to pay the taxes.”

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It’s so common, Ray Garner established a thriving auction business from it.

“Estate sales are hard – selling personal items of family members,” said his wife Maddy Garner, who learned personally during the auction of her mother-in-law’s estate. She works at Edward Jones in Gardnerville.

With the federal government’s 10-year tax plan ending in 2010, the IRS has allowed tax exemptions in varying amounts. In 2000, the estate was permitted to use a $675,000 exemption. The assessed value over and above that amount was taxed at a rate of 55 percent.

This year, estates are allowed a $2 million exemption as a method of tax relief. Proceeds over and beyond that amount are taxed 46 percent. The tax goes away in 2010, but there’s no telling what the feds will do with it in 2011.

Even at a rate almost 10 percent lower than six years ago, estate taxes amount to some of the heftiest burdens.

Both Sillings and Bankofier recommend families ease the burden by placing a portion of assets in a separate title account as in a trust to take advantage of the parents unified credit. There are also insurance policies to protect the assets.

Estate taxes

National estate tax returns submitted, according to the IRS:

— 1995 – 69,755 amounting to $117 billion

— 2003 – 72,590 amounting to $200 billion

California returns submitted:

— 1995 – 10,712 amounting to $18 billion

— 2003 – 13,080 amounting to $35 billion