Minimize estate taxes by planning

LONGVILLE -- Estate taxes can be minimized if you plan while you are alive and make donations or give gifts before you die, said Jerry Roehl, certified public accountant with Pederson, Smith, Roehl & Co. of Walker.

He spoke March 1 at a Cass County Extension program in Longville about wills.

Before you write a will and to determine what estate taxes your heirs might face, it is important first to determine the verifiable value of your estate, Roehl said.

It may be worthwhile to have a licensed appraiser do an appraisal of real estate property you own or determine valuation for higher valued personal property, he said, so the IRS does not question your values at the time you or your spouse die.

Currently, estates valued at $675,000 or less are not subject to estate taxes. That figure will increase next year to $700,000, in 2004 to $850,000 and in 2006 to $1 million.

Only people having estates higher than that ceiling should consider establishing a trust, Roehl said.

Making charitable donations while you are alive makes more sense than to wait until after you die. You not only prevent estate taxes on the donation, but also can receive a tax deduction yourself, Roehl said.

Tax free donations can be made to each individual or charity up to $10,000 per recipient each calendar year, he said.

Donations of $10,000 or more require that a gift tax form be filed with the IRS, he said.

Donations and gifts can be one way to bring an estate under the $675,000 ceiling, he said.

Another way to limit estate taxes due is to create a credit shelter trust, Roehl said. Principle on financial assets remains intact, but the surviving spouse can continue to receive income from interest earned on the principle.

The trust will need to go through probate court, however, he added.

If you sell land or a farm now, you will pay capital gains tax on the difference between what you paid for it and the selling price.

If you let it transfer to your children with an estate, then let them sell it, they pay capital gains tax only on the difference between its value at the time of your death and the selling price, a much lower amount, Roehl said.

It makes more sense to defer the sale of non-homesteaded property until after an estate is settled, he said.

The term for the person named in a will to process the will has changed from "executor" to "personal representative," Roehl said. That person will be responsible for filing the estate tax form with the IRS.