Advanced Planning = Lower Estate Taxes


Currently, up to $3.5 million of an estate’s value is exempt from Federal estate tax for deaths occurring in 2009.  In 2010, the estate tax is scheduled to expire for a period of one year, returning in 2011 with a lower $1,000,000 exemption.  That is, unless Congress has anything to say about it.

Estate taxes have become a major source of revenue for the Federal government and chances are good that Congress is not to let the estate tax expire even for one year.  We in the estate planning community are keeping a watchful eye on this, knowing that chances are good that Congress will enact legislation in order to avoid the full repeal of the estate tax.

Many states, including Maryland, have moved away from the Federal exemption and exclude only $1 million.  Therefore, even if you are exempt on a Federal level, your estate may still be exposed to State estate taxes.

Advanced planning is the only way to shield against any estate tax.

Some things to consider:

Leaving Your Entire State to Your Spouse

The majority of married couples leave everything to the surviving spouse in their wills. In some cases, this can be advantageous.  However, in others, it can mean paying substantial and avoidable estate taxes when the second spouse dies.

Reduce the Size of Your Estate Through Gifting

Using the annual gift tax exclusion of $13,000 per recipient can reduce the size of your estate.  If your spouse joins in the giving, you can transfer up to $26,000 to any number of recipients during the year.

Establish an Irrevocable Life Insurance Policy

In most cases, the proceeds of life insurance policies are subject to tax as part of one’s estate.  Establishing an irrevocable life insurance trust as “owner” of the policy can shelter the proceeds from estate tax.

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