In the area of estate tax, there are a lot of statements they get thrown around that confuse many people. Because of this, there are a number of myths that have to do with estate taxes. Here are some of the most common estate tax myths that you should know about. 

1. It Is a Common Tax

Many people mistakenly believe that the majority of estates face this type of tax whenever an individual dies. In reality, this is simply not the case. This tax only affects a very small percentage of the population of the United States. In order to be affected by estate taxes, you are going to have to have a sizable amount of assets accumulated. Although the government changes the estate tax regularly, it has always go with those that have over $1 million in assets. In the past, you had to have an estate of over $3.5 million before you would have to pay any estate taxes. Most people do not die with estates that are anywhere near that large. Because of this, the vast majority of people can get away without paying any type of estate taxes whatsoever. If you have a sizable estate, you could be affected by this tax and you should take the necessary estate planning steps to minimize the impact.

2. Double Taxation

Many people mistakenly believe that estate tax represents a situation that creates double taxation. They believe that because you are paying income tax on your annual income and then paying another tax when you die, you are essentially paying taxes on the same money twice. However, this is not entirely true. While it potentially could tax portions of the same money twice, much of the taxation does not come from the same money. Those that have large estates typically accumulate them through investments and making purchases of appreciating assets. For example, if you own a business, the value of the business could grow substantially over the course of several years. Whenever you pass away, you will need to pay taxes on this value or that money would never be taxed. The same goes for real estate or any other securities that you might have purchased over the years. This is a way to complete the taxation process for those that have accumulated substantial assets.

3. You Can Get out of Estate Taxes

Really the only way to avoid estate taxes completely is if your assets total up to a value that is below the estate tax exemption. If your assets add up to more than the estate tax exemption, you will not be able to get out of paying taxes. If you use the proper estate planning tools, you can minimize the impact of taxes that you can never simply get out of paying them. For example, if you use an A/B trust, you can separate marriage property into two different sections so that you can get two different exemptions. However, if your estate is big enough, there is really no getting out of these taxes.

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