Understanding Estate Taxes
Strategies To Reduce Or Eliminate Your Estate Taxes
14. How To Reduce or Eliminate Estate Taxes Summary Chart
1.
If Married, Use Both Exemptions
(Living Trust with Tax Planning)
• Uses both spouses' estate tax
exemptions
• In 2009, protects up to $7 million
from estate taxes
2. Remove Assets From Estate
(Make Annual Tax-Free Gifts)
• Simple, no-cost way to save estate taxes
by reducing size of estate
• $13,000 ($26,000 if married) each year per
recipient (amount now tied to inflation)
• Unlimited gifts to charity and for
medical/educational expenses paid to provider
(Transfer Life Insurance Policies to
Irrevocable Life Insurance Trust)
• Removes death benefits of existing life
insurance policies from estate
• Included in estate if you die within three
years of transfer
(Qualified Personal Residence Trust)
• Removes home from estate at discounted
value
• You can continue to live there
(Grantor Retained Annuity Trust / Grantor
Retained Unitrust)
• Removes income-producing assets from
estate at discounted value
• You can continue to receive income
(Family Limited Partnership / Limited
Liability Company)
• Lets you start transferring assets to
children now to reduce your taxable estate
• Often discounts value of business, farm,
real estate or stock
• Can protect the assets from future lawsuits
and creditors (including ex-spouses)
• You keep control
(Charitable Remainder Trust)
• Converts appreciated asset into lifetime
income with no capital gains tax
• Saves estate taxes (asset out of estate) and
income taxes (charitable deduction)
• Charity receives trust assets after you
die
(Charitable Lead Trust)
• Removes asset from your estate, saving
estate taxes
• Income goes to charity for set time period,
then trust assets go to loved ones
3. Buy Life Insurance
(Through Irrevocable Life Insurance
Trust)
• Can be inexpensive way to pay estate
taxes
• Death benefits not included in your estate