Estate Planning: Do I need to do that now?

[moonshine]

What's estate planning anyway?
my insurance agent told me it's a good idea to get insurance for my parents as protection against estate taxes in the event that something happens to them. medyo may edad na kasi ang parents ko.

is there a way out of estate taxes? 20 percent daw ng value ng property ang rate ng tax?

what other options are there so that one person's properties aren't taxed that heavily upon his death...such that the heirs will be hard pressed to pay for the taxes?

hope someone can help me out.

[Hulk]

Estate planning is done specifically to eliminate or reduce transfer taxes upon the death of a family member.

Estate tax is one form of transfer tax. The estate tax is levied on the value property of the deceased as it is transferred to its new owners/heirs. The computation of estate taxes is slightly complicated to fully explain in this thread but it is quite expensive.

An alternative to estate tax is donor's tax. Here, the person donates his property to his heir. Again this could be quite expensive as only a limited number of deductions is allowed in this type of arrangement. If you're getting married in the near future, this might be a good option since dowries are considered as exemptions to this tax.

Another option is sale. A person on contemplation of death, sells his properties to his heirs at a low sales price. The amount is then subject to sales tax. This could be potentially cheaper since you can basically arrange the sales price which is the basis of the tax. However the law states that the basis of the tax should be the fair market value of the property, so if you get caught and assessed selling below fmv, then it could also get expensive.

For the really rich folks, they set up companies that would include substantially all their properties. They do this because the transfer taxes for shares of stock is way, way much lower than any of the other taxes. For a listed stock, I think the tax is only 1/2 of 1% of the total price.

What your friend is telling you is that in the event of your parents death, you could get money from the insurance to pay off your estate taxes. I could not comment on the advisability of this option though, since insurance for old people could really be expensive.

Well I hope the lawyers in this forum could shed clearer light on the subject matter, kasi di naman ako lawyer eh.


:frank:

[KuyaDanny]

To Hulk:

:handsdown:

[KuyaDanny]

Originally posted by moonshine
is there a way out of estate taxes?

There is no (legal) way out of estate taxes, but there are legal ways to minimize them, as Hulk as pointed out. If you think these amounts are significant, it might be worth hiring a lawyer or tax adviser to assist you.

[moonshine]

thank you so much, Hulk :) :) :) thanks for giving us some options to work with. i am planning to set up a meeting with a lawyer to ask about these.

[moonshine]

question: about what you said, hulk: re. forming a company that includes one's properties. is this like a holding corporation? i hope that some lawyers in pex could also poke their head in this thread to answer in more detail. :) thanks again, hulk!

[Hulk]

Originally posted by moonshine
question: about what you said, hulk: re. forming a company that includes one's properties. is this like a holding corporation? i hope that some lawyers in pex could also poke their head in this thread to answer in more detail. :) thanks again, hulk!

It doesn't have to be a holding company, just a regular company would do. You could just about register a company for whatever purpose. The owner then contributes his property to the company as his capital contribution. He can then later on sell shares of this company to his heirs.

The tax for shares is:
Listed companies - 1/2 of 1% of the total aamount
Unlisted companies - 10% of capital gains for 1st P100,000 and 20% of capital gains in excess of P 100,000


:frank:

[nailbiter]

An alternative to estate tax is donor's tax. Here, the person donates his property to his heir. Again this could be quite expensive as only a limited number of deductions is allowed in this type of arrangement. If you're getting married in the near future, this might be a good option since dowries are considered as exemptions to this tax.

My father died last month so I've been trying to read up on estate planning so my mom and I can make preparations for when our time comes. Hence, reviving this thread. Immediately looked up the tax law upon reading this, turns out the exemption for dowries is only up to the first P10,000. Now, does that figure refer to the tax or to the value of the property?

This isn't an estate planning question but an estate tax question. How does one compute the value of a 1993 model vehicle and a 2003 model vehicle that's still under mortgage?

[kamehameha]

How does one compute the value of a 1993 model vehicle and a 2003 model vehicle that's still under mortgage?

Are you in the US? I think if you will go to the Kelly Blue book website (www.kbb.com), they can give you the info regarding the value of your vehicle.

Regarding estate planning, www.money.cnn.com has some info:
http://money.cnn.com/pf/101/lessons/21/

[SILENTMAX]

my relatives and our family have been doing this. right now my parents are transfering land titles to our names(us children) and most of their bank accounts are joint "either or" ive began to suggest the company solution to further reduce taxes to my parrents they are currently thinking about it.


how about wills anyone care to talk about it here?

[nailbiter]

Are you in the US? I think if you will go to the Kelly Blue book website (www.kbb.com), they can give you the info regarding the value of your vehicle.

Dito lang po sa Maynila.

[tolstoy]

Hi moonshine.

Yes, your insurance agent and other posters are correct. You
essentially use insurance policies to generate funds to pay off the BIR. It is best to get these policies when one is still young... the older, the more expensive the policy.

Also, new insurance policies are now available to safely invest "cash
funds" of senior citizens, typically uninsurable or are very expensive
to insure and make the funds immediately available to the children and kinfolk. Investments are placed in blue chip companies and government securities. Very safe and secure.

e-mail me should you need additional information.