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Tax Saving Strategies

The federal government levies a substantial tax - from 18% up to 47% in 2005 - against the value of your estate. That tax is due and payable before any property can be transferred to your beneficiaries.

Do you want a percentage of your estate to be consumed by estate taxes, or would you rather take steps now to minimize the taxes your heirs have to pay? If your answer is the latter, you'll be relieved to know there are strategies you can employ to significantly reduce the bite the government takes out of your estate.

  • Credit Shelter Trust - It's possible for many married couples to double the amount that will transfer from their estate tax free. In order to protect assets that total more than the applicable credit amount you and your spouse are entitled to, the two of you can use a Credit Shelter Trust to receive the maximum tax credit allowable. Substantial tax savings are achievable. (Note: A Credit Shelter Trust must be established in both spouses' wills in order to take advantage of your full credits.)
  • Changing Ownership of Assets - Re-titling them from Joint Tenant to Individual allows you to equalize ownership of assets between you and your spouse, thus allowing you to take maximum advantage of your applicable credit amount. Re-titling assets can often be more difficult to do than establishing a credit shelter trust, but it may result in additional tax savings.
  • Irrevocable Life Insurance Trust - It takes careful planning to ensure that your heirs have the cash liquidity they need to pay estate taxes and other expenses, but by doing so, you can eliminate their having to settle for hasty liquidation of assets at less than optimal value. Purchasing life insurance through an Irrevocable Life Insurance Trust (ILIT)** can provide the cash needed to protect your estate's full value for your heirs. The life insurance proceeds in an ILIT do not become part of your taxable estate.
  • Make Annual Gifts - Using the annual personal gift allowance is an effective way to reduce your future taxable estate. You can give away up to $11,000 per individual and up to $22,000 from both you and your spouse, exempt from gift taxes. There may be circumstances when even larger gifts may make estate planning sense, although they are likely to be subject to gift tax. Unlimited amounts of tuition and medical expenses are not treated as taxable gifts if payments are made directly to the provider.
  • Consider Charitable Donations - Making gift to qualified not-for-profit organizations may allow you to decrease your income and estate taxes. Certain charitable gifts can even provide increased income, increased net worth or return assets to your heirs at more favorable gift tax rates than they would otherwise enjoy.

Our financial services professionals, in conjunction with your attorney and accountant, are prepared to help you by reviewing your personal situation and devising smart, cost-effective estate tax savings strategies.