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Estate Preservation and Estate Planning is an in-depth subject. For most individuals Estate Taxes are not a major concern, because current Estate Tax exclusions are adequate to prevent this tax for average ordinary citizens. The exclusion for 2009 is $3.5 million. Estate planning as it relates to Federal Taxes, is comprised of three types of taxes; Federal Estate Tax, Gift Tax and the Generation Skipping Tax (GST). The Gift and GST Tax help wealthy individuals reduce or eliminate Estate Tax by using them to make " lifetime transfers".

Currently we are in uncharted waters in that, the current Federal Estate Tax is to be repealed in 2010, (as of 2009 the Estate Tax exclusion is $3.5 million). No one realistically expects Estate Taxes to go away after 2010, in fact Congress has passed legislation for what is known as a “Sunset clause” effective for January 1st, 2011, this would cause the Estate Tax to revert to 2001 guidelines. Yet for those with substantial assets (approaching or exceeding the exclusions), particularly assets that are not readily liquid (Real Estate, Intellectual property, etc) the Estate Tax is a looming storm.

Since the Federal government demands this Tax be paid in a timely manner, selling of illiquid assets under duress is a bad option. If you are in this situation we can help you to solve this dilemma through the use of Life Insurance, call us at (800) 361-8781. Here are some pointers:

  • First and foremost you need “Liquid Assets” to pay the tax. Life Insurance and Cash or Cash-like reserves are preferred. The benefit of Life Insurance is that you use “Pennies to get Dollars”.
  • If you do have Life Insurance it should be held in a Trust. Since there are a number and variety of Trust available it is important to get good advice and use the correct one.
  • If you have something of value and don’t need it, “Gift” it away. You are allowed $12,000 yearly as an individual ($24,000 for married couples).
  • Know and use your Estate tax exclusion. These are located in the Unified Tax Table guide. An abbreviated overview is below.
  • Have an up to date Will. Think about it, read your current Will does it convey your current desires.
  • Be aware of the value of all assets. Particularly those where values change, such as Equity investments and Real Estate (although real estate values have retracted as of late it will not always be so, stay informed).
  • Position assets to avoid probate such as “joint tenancy”. Think through whom would be best suited to act as Trustee and/or Executor. Family members may not always be the best choice.
The benefit of Life Insurance is that you use “Pennies to get Dollars”. If you do have Life Insurance it should be held in a Trust. Since there are a number and variety of Trust available it is important to get good advice and use the correct one. If you have something of value and don’t need it, “Gift” it away. You are allowed $12,000 yearly as an individual ($24,000 for married couples). Know and use your Estate tax exclusion. These are located in the Unified Tax Table guide.

An abbreviated overview is below. Have an up to date Will. Think about it, read your current Will does it convey your current desires. Be aware of the value of all assets. Particularly those where values change, such as Equity investments and Real Estate (although real estate values have retracted as of late it will not always be so, stay informed). Position assets to avoid probate such as “joint tenancy”. Think through whom would be best suited to act as Trustee and/or Executor. Family members may not always be the best choice.

 Year

Maximum Estate Tax Rate

Estate Tax Exclusion
Amount

Estate Tax Applicable Credit

Gift Tax Applicable Credit

Gift Tax Exclusion Amount

GST Tax Exemption

2009

45%

$3.5 Million

$1,455,800

$345,800

$1 Million

$3.5 Million

2010

35%
(Gift Tax Only)

Estate Tax Repealed

Estate Tax Repealed

$345,000

$1 Million

GST Tax Repealed

2011

55%
(Plus 5% Surcharge)

$1 Million

$345,800

$345,800

$1 Million

$1,060,000