Union Hill Financial Planning

Estate planning clients sometimes ask if Georgia has an additional estate tax – on top of the federal estate tax system. The answer depends on the year you die.

Background: The Georgia tax rules say Georgia estate tax is equal to whatever the federal system allows as a credit for state death tax. So if the federal system allowed a $10,000 credit for state death tax, Georgia would charge an estate tax of $10,000.

Our current federal tax system has zero credit for state death tax for the next two years. A new credit might be instituted in 2011, but nobody knows because the federal estate tax system is due for a large update in 2011.

What does this mean to you?
1 – there’s currently no Georgia estate tax form to fill out — not for the next 2 years
2 – rules might change, but base your estate plan on the Federal exemptions and don’t worry about the Georgia estate tax.

Mike Dayoub is a fee-only financial planner in North Metro Atlanta. Website.

P.S. Estate planning is a much larger topic. I answered this question because I don’t see much written about it for Georgia. I don’t practice law. I team with a variety of estate attorneys and value their input, so call me if you have more to say on this topic.

The market downturn creates a couple of opportunities in your estate plan.

• While your investments’ values are low, you might want to gift some of those assets to your heirs. There are other strategies to leverage gifts, such as trusts, family limited partnerships or limited liability companies.  Call me to discuss.
• If your adjusted gross income (AGI) does not exceed $100,000, you can roll over from your IRA to a ROTH.   In 2010, there’s no AGI limit.  Pay taxes on those funds now, while asset values are low.   You can also convert your 401(k) to an IRA and then to a Roth.   Planning is needed so you know how much tax you’ll be paying.  Try not to use retirement funds to pay the tax.

There are 2 other Estate Plan items to check now that the markets are down:

What looked fair to your heirs a few years ago might not seem fair to you now, since different assets declined.

Your generation-skipping trusts and your other trusts might not be capturing the right maximums, now that asset values have changed.  You might need to move some assets that would have been taxed into those trusts that wouldn’t be taxed, to take full advantage of those trusts.

Mike Dayoub is a fee-only financial planner in Alpharetta GA. Website.