Estate Planning - How to Limit Your Estate Taxes

How to Limit Your Estate Taxes

You and your spouse are entitled to a $625,000 exclusion (this will increase each year under the new tax laws). This exclusion currently allows for $1,250,000 to pass to your heirs estate tax free.

The key is to make sure that each spouse has title to $625,000 of assets that can be excluded. If you or your wife hold title to all or most of your marital assets, you will not be able to utilize the exclusion. This is why it is key to transfer title into each of your names to prevent the loss of deduction.

Your heirs may need you to own life insurance to help pay for your estate expenses, debts, taxes, but you do not want to own the insurance policy. The reason you do not want to own the life insurance policy is your estate includes any value of life insurance you own personally. The best way to own these policies is through a revocable life insurance trust or by another family member. The family member should pay the premiums from his/her own checking account. The IRS will examine thoroughly and will tax any insurance if it is not properly set up.

What are you going to do if you become physically or mentally handicapped and incapable of managing your estate? You have very few options for management of your estate until a court declares you incompetent and appoints a guardian.

You can create a durable power of attorney to protect your assets and control the person who is selected to handle your estate. Another option is to set up a revocable trust, and name a successor trustee in case you become disabled.

A living trust only avoids probate and protects your assets in the event of disability. The living trust does not protect you against paying excessive taxes. You need to take additional steps to reduce your estate taxes. You need to transfer the assets into the living trust, or the living trust is not doing all that it can.

You can give away $10,000 a year gift tax free. If you are married your wife can give away another $10,000 a year. If you have 3 kids, you can give away $60,000 a year gift tax free. Also, you can give away $10,000 a year to anyone. Also, you get the benefit of watching the person enjoying your generous gift.

Remember you do not want to give away too many gifts that it puts a strain on your quality of life.

If you are interested in limiting the money your estate pays to attorneys, one of the best things you can do is leave a detailed list of what you own, what to do with your assets, and a contact list for your assets. Also, let someone know exactly where your safety deposit box key and other vital information is kept in your home.

Whether you have a small estate or a large estate, it is important to minimize your estate taxes. It essential that you have a solid estate plan to maximize the amount of money that is passed to your heirs and not given to the Government.

Pape Financial Services, Inc. 9729 W. Grand Ave ~ Franklin Park, IL 60131~USA
Tel: 847.455-9500~Fax: 847.455.9501

Please fill out our contact form with questions or comments about this web site.
Last modified: April 15, 2003