Estate and Gift Planning

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Estate and Gift Planning

A little planning can save thousands of dollars!

You can't take it with you, but failing to plan for your estate can mean that the government, rather than your heirs, may get the major portion of your hard-earned money.

Over the coming years, the Tax Relief Act of 2001 gradually reduces estate and gift tax rates, and the exemption amount increases. The estate tax will be repealed in 2010, but the gift tax will be retained. Ironically, the estate tax will be reinstated in 2011 to pre-2001 Tax Act rules unless Congress acts to extend the 2001 law. In the midst of these phase-in and phase-out provisions, a little planning can save thousands of dollars.

You may be surprised what your estate is worth. Add up the value of all your assets. Don't forget life insurance which may fall into your estate. If your total value exceeds the exemption amount, you should look into what a few simple planning techniques can save your family at estate time. In addition, there are some very effective estate planning ideas that can also cut your current income tax bill.

Click here to use an estate planning calculator to help you determine what your estate is worth.

Some planning possibilities:

Current tax law allows you to give away $11,000 per year per recipient. (This amount is adjusted annually for inflation.) Your spouse may join in the gift even if he or she is not an owner in the transferred asset. This means that you could transfer up to $22,000 per year to each of your heirs. To double the annual exclusion yet again, you may want to include spouses of your children. The person receiving the gift does not need to be related to you. These annual gifts do not reduce your estate tax exclusion.
Unlimited gifts
You can make unlimited gifts to pay for another individual's medical expenses or school tuition as long as your payments are made directly to the institution.
Property transfer
If you have property which is not needed for your retirement, maybe it is a candidate for transferring during your lifetime. If it is a large income-producer, the future income will be taxed to the new owner and not to you, plus the property will be out of your estate.
Spousal transfer
You can make unlimited transfers to your spouse either during your lifetime or through your estate. There are no taxes on spousal transfers, regardless of size. But leaving everything to your spouse may not be a good idea, since doing so fails to utilize the lifetime exclusion amount in the estate of the first spouse to die. Planning will allow you to use the exclusion in both estates, and you'll be able to transfer twice as much to your heirs free of estate tax.
Life insurance proceeds
With proper planning, certain life insurance proceeds can be kept out of your estate.

For assistance with your estate planning, contact us.


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