The federal estate tax exemption of $3.5 million expired on December 31, 2009. There is absolutely no federal estate tax for 2010 and unless Congress acts, the exemption for 2011 will be $1 million. Here are some ways to shelter your assets for 2011 and beyond since the “die in 2010 and save” strategy just seems all wrong in so many ways.
1. Take advantage of the marital deduction. Any amount passing from one spouse to another is free of estate taxes. Therefore it is important to title assets between spouses and prepare wills and or trusts to take advantage of the use of one or both of these exemptions to the extent available.
2. Make tax- free gift of $13,000 to any number of beneficiaries each year, called the annual exclusion. The annual exclusion is $26,000 when a husband and wife both join in the gift.
3. Consider a life insurance trust. If the trust owns the insurance and is set up and administered properly, the proceeds of the insurance policy will not be included in the estate. Instead, the proceeds will pass tax-free to the heirs.
4. Spend money. Charitable gifts offer income tax as well as estate tax benefits. Also, direct payments of tuition bills and medical bills for others are not considered gifts if the payments are made directly to the providers.
To do nothing at all will only benefit the government and potentially lower the amount your heirs receive after you die. Your hard earned money is better off in their hands than the hands of the IRS!
If you would like to discuss your estate plan, please call my office or e-mail me at firstname.lastname@example.org.