If you would like to learn more about saving estate taxes for your family in a free initial conference, call me at (405) 842-7590 or click here to E-mail me. Check out this page below to have a general idea if your family would have to pay federal or Oklahoma estate taxes after the deaths of you and your spouse (spouse means husband or wife).        

Can you pass your estate to your children free of estate tax? Here's how you find out.        

Quick Look

If you generally know the value of the property less liabilities that you and your spouse own, use that number for your net estate. Look at the tax table below. If your net estate is less than the Oklahoma exemption, and your property is all going to lineal heirs, such as parents, spouse, children and grandchildren, then you do not owe any federal or Oklahoma estate tax.        

You can stop here, stop worrying about estate taxes and go to the other pages on estate planning for your family, such as what you can do with wills and trusts, asset protection, easing worries in a second marriage or for a loved one in a nursing home.        

More Detailed Look

If your family does not fit the situation described above, or you want a better idea if you will owe estate taxes, follow the method described below.        

FIRST: Add up all the property in your estates, subtract liabilities to find your net estate.        

Add assets. Add the current value of all property owned by you alone, by your spouse alone, by both of you in joint tenancy or by both of you as tenants in common (owned in both names, but no right of survivorship). This property includes real estate, stocks and bonds, cash, savings and investment accounts, Certificates of Deposit, business interests, such as partnerships, limited liability companies, boats, collections, such as art, coin or gun collections, and household furniture, fixtures and personal effects. Don't use the value you paid for these items of property, use the current fair market value. What could you and would you sell them for today? What would they bring in an estate sale?        

Add the face value of all life insurance either one of you owns on your own life or the other spouse's life. Add the value of retirement programs, IRA's and annuities that will continue to pay after the death of the annuitant. If you and your spouse died today, how much would these insurance policies and retirement plans pay to others? That total is the number to add to value of the other property described above. The numbers do not have to be exact. Round them off based on the information you have. This will give you a general idea of your combined taxable estates.        

Subtract liabilities. Subtract the balance of the mortgage on the house, the balance owed on a car, and any other mortgages. Subtract current credit card debt, bank loans, taxes owed and any other liabilities.        

Combined assets of husband and wife minus combined liabilities = net estate.        

IS YOUR ESTATE TAXABLE?

Look at the following table for federal and Oklahoma estate tax exemptions for the next several years. You may have no federal estate taxes to pay, but some Oklahoma estate taxes to pay. If your net estate is less than the federal exemption amount, your combined estates are free of federal estate tax. If your net estate is less than the Oklahoma exemption, your combined estates are also free of Oklahoma estate tax. Note that the Oklahoma estate tax rates are different for lineal heirs and collateral heirs. Lineal heirs are the spouse, lineal ascendants (parents, grandparents, etc.) and lineal descendants (children, grandchildren, etc.) of the decedent. Collateral heirs are everyone else, such as brothers, sisters, cousins, unadopted step-children and friends. For example if all your property goes to your spouse, parents, children or grandchildren, use the Oklahoma lineal tax column.        

Since the federal exemption is larger than the Oklahoma exemption, some estates owe Oklahoma estate tax, but no federal estate tax. Suppose your net estate equaled the federal exemption amount. What would your Oklahoma estate tax be? In the table below. the federal exemption is shown, then the Oklahoma exemption is shown, and the amount of lineal heir tax and collateral heir tax on the difference between the federal exemption and the Oklahoma exemption for that year. Collateral heirs do not receive the Oklahoma exemption and the tax rate is higher.        

Generally all property passing to the surviving spouse, escapes estate tax in the first estate. Then upon the death of the surviving spouse, the surviving spouse's estate (the entire combined estate) is taxed.        

For example, in the table below, if the surviving spouse died in 2002 with an estate of $1,000,000, there would be no federal estate tax, but for property passing to lineal heirs there would be an Oklahoma estate tax on the difference between the federal exemption amount of $1,000,000 and the Oklahoma exemption amount of $700,000, or $300,000. The Oklahoma estate tax on $300,000 passing to lineal heirs is $9,600. If all the property went to collateral heirs, there would be no Oklahoma exemption, and the entire $1,000,000 would be taxable in Oklahoma at the higher collateral heir estate tax rates. Even though there is no federal estate tax on $1,000,000, the Oklahoma estate tax on $1,000,000 passing to collateral heirs is $115,200.        

TAX TABLE

If your net estate (combined property owned by husband and wife, less liabilities owed) is less than the exemption amount for the current year, you do not owe estate taxes. You can go on to do your estate planning for your family without worrying about estate taxes.        

However, if you would owe estate taxes, you had better call me, or someone, to help you. If you do your wills and trusts correctly, you can double the exemptions in the table above. Some people call this a voluntary tax. You or your children can pay it if you want, but you do not have to, if you do your wills and trusts correctly. This is the biggest estate tax savings estate planners can provide for most people. If your estate would still be taxable, there are many techniques we use in estate planning to reduce taxes on large estates.        

If you have estate tax problems, come in for a free initial consultation to see what can be done, the benefits and cost for you and your family, if you do your estate planning and if you don't. I can help you do for your family what you want to do. Let me help you.        

Call (405) 842-7590 or E-mail me for an appointment for your free consultation.