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Common Estate Planning Mistakes That Increase Your Taxes

A well-planned estate is vital in order to protect the wealth you have for children. Beware of these common mistakes in estate planning in order to avoid paying extra tax on estates (death tax) in the IRS as well as the taxing authorities of your state, which can reduce your child's inheritance. 

You'll be happy to learn that these costly errors can be easy to avoid with proper planning. The failure to understand the importance of the estate tax law of the State. You can get more details on estate planning from various online sources.

A number of states have their own inheritance tax (death tax) and the majority of them do not have "decoupled" taxes on estates from Federal estate tax. This means that your estate may be subject to the state estate tax regardless of whether Federal estate tax is due.

The Federal estate tax exemption stands at $5.12 million (for 2012 only) and the thresholds for state estate tax for states that have estate taxes are below this threshold (most often, $1 million) in the absence of proper planning this gap could lead to a painful shock for your heirs after your passing away. 

The Act also provides for an exemption from the death tax of $5 million for the year 2011 and $5.12 million for 2012. The Act also allows an option for "portability" among spouses with the same exemption estates of deceased decedents in 2011 or 2012.