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Posted on April 12, 2018 in Firm News
G-“G” stands for GENERATION SKIPPING TAX. When a person dies and transfers their assets to their heirs (traditionally, their children ) the government imposes a tax on that transfer, something usually called an estate tax. Those children would then later transfer some or all of those assets to their children. When this occurred, there would be another transfer/estate tax imposed on the same asset, effectively, the same asset was taxed twice. In an attempt to avoid this double tax, some individuals simply skipped the first transfer to their children and left some assets to their grandchildren instead, effectively “skipping a generation” and a level of tax. The government caught on and imposed a tax on transfers that skip generations.
H-“H” stands for HEIR. When someone dies the person who is legally entitled to that individual’s assets and property is the HEIR.
I-“I” stands for IRREVOCABLE, IRS,IRAs, and ILITs. An IRREVOCABLE trust is a special kind of trust that has serious implications, and should not be undertaken without seeking advice from an attorney and a tax advisor. These kinds of trusts have their uses, but fit only a small fraction of the public. The IRS governs the tax effects of the choices made in and through your estate. Poor planning can result in wild swings in tax exposure (greater or lesser) of your estate. Many, many people have IRAs. An Irrevocable Life Insurance Trusts, better known as an ILIT is a tool to pay off estate taxes by purchasing life insurance in the amount of the taxes estimated to be owing at the time of death. In this way, the beneficiaries inherit most, if not all, the estate without having to pay tax from it.
To Be Continued……