Estate Tax Planning

Estate Tax Planning

The federal Estate Tax (sometimes referred to as the “death tax”) is a tax on the transfer of property at death. All property the decedent owns or has an interest in at death, in whatever form it is held, is subject to the tax. The federal Estate Tax is assessed on the current fair market value of the assets. In other words, the tax is calculated based on what the assets are worth today, not the original value at the time of purchase by the deceased.

Basically, when people die, their assets become the property of their estate. Everything a decedent owned or had a financial interest in at the time of death—from stocks and buildings, for example, to jewelry and artwork—is considered part of his or her estate. If the value of the decedent’s gross estate exceeds a certain amount, Estate Taxes are due, and the executor of the estate must file a federal Estate Tax return. (Form 706).

One of the ways we reduce your potential future tax liability and shift assets out of your taxable estate is through Irrevocable Trusts. Many Irrevocable Trusts have unique features to help minimize your future Estate Tax burden. With Grantor Retained Annuity Trusts (GRATs) and Spousal Lifetime Access Trusts (SLATs) you can move highly appreciated assets out of your estate. Intentionally Defective Grantor Trusts (IDGTs), allow you, the grantor or owner of the Trust, to pay for any income tax owed on assets housed within the Trust. This means you can further reduce your taxable estate each year by covering the cost of those annual taxes.Irrevocable Life Insurance Trusts (ILITs), can own a life insurance policy so that your heirs can use policy proceeds to handle Estate Taxes, keeping all of the assets you wanted to give intact instead of being diminished by a large tax bill.

Estate planning decisions can involve a great deal of complex decision-making and knowledge, particularly when taxes are involved. Working with an estate planning attorney well-versed in advanced Estate Tax planning strategies can help you weigh your options and find the optimal strategy to transfer wealth while minimizing taxes.