Can I Avoid Taxes?

We performed a survey to find the top ten reasons why people like your were preparing a Revocable Living Trust. What we found was what we expected. The number one reason people were interested in a Living Trust was to minimize estate taxes.

Much of the estate planning process focuses on reducing or eliminating taxes. The U.S. government imposes a tax on the transfer of your property to others both during your lifetime and when you pass away. This tax is known as the Unified Gift and Estate Tax.

In 1976, 1981, 1986 and now in 2001, Congress extensively overhauled the federal estate and gift tax laws. With the exception of a law providing for a marital deduction in 1948 these were the first major changes in these laws since 1942. As a result, death tax payments were assessed only against the wealthy and the moderately wealthy. With these laws, the majority of the population benefited since smaller estates did not have to pay estate taxes.

Not everyone has to worry about paying federal estate taxes. If your estate falls under the government exemption your trustee/executor does not have to file an estate tax return (Form 706) and pay the required tax within 9 months of your death.

Unfortunately, many people feel confident that their estate will pass without the threat of paying estate taxes. However, most do not adequately calculate the value of their estate. With careful calculation many find that their estate values are over the exemption rate.

It is important for you to realize what property will be included in your estate for federal estate tax purposes. The estate includes all property owned by the decedent at the time of death: investments, cash, real estate, vehicles, personal property, life insurance proceeds from policies owned by the decedent within three years of death, life insurance paid to the estate, retirement assets and business interests. The gross estate also includes assets passing through probate as well as assets inherited directly by joint owners or beneficiaries. This includes part interests, intangible property, property placed in a revocable living trust and other interests transferred by a decedent who retained control or an interest in the property.

As you can imagine, once calculated you may be surprised to find your net worth. Learn everything you need to know about creating an estate plan and protecting your families assets by Downloading the Estate Planning Package.