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Estate Tax Planning
Confused About Estate Taxes?
Despite the Economic Growth and Tax Relief Reconciliation Act of 2001, estate taxes could still have an impact on your estate and beneficiaries. Learn more about:Estate Tax Legislation: Is Your Estate at Risk?
The 2001 tax legislation has caused many people to disregard the threat of estate taxes. As it stands now, the applicable exclusion (the amount that's not subject to estate taxes) is scheduled for one additional increase before 2010, when the estate tax will be repealed for one year only. However, unless Congress takes action, even higher estate taxes will be back in 2011.|
Maximum Estate Tax Rates & Exemption Amounts (The Economic Growth & Tax Relief Reconciliation Act of 2001) |
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| Year | Exclusion Amount | Tax Rate |
| 2006 | $2 million | 46% |
| 2007-2008 | $2 million | 45% |
| 2009 | $3.5 million | 45% |
| 2010 | Not applicable | Not applicable |
| 2011 | $1 million | 55% |
Your Taxable Estate
Generally, assets you own or control are part of your taxable estate. That includes:• IRAs and retirement plans
• Life insurance
• Annuities
• Other assets that have a beneficiary designation (including transfer on death accounts)
• Assets held in a revocable trust
• Assets held as joint tenants with the right of survivorship
Be sure to include each of these when calculating your estate. Use our estate tax calculator to see an estimate of your estate's tax liability.
Strategies to Help Reduce Estate Taxes
If you're concerned about estate taxes, you can use a variety of strategies to help reduce your estate's tax bill, including:• Credit shelter trust planning
• Annual gifting
• Life insurance
• Irrevocable life insurance trust
Credit shelter trust planning. A credit shelter trust enables married couples to use each spouse's applicable exclusion ($2 million in 2008) to protect $4 million from estate taxes. When one spouse dies, a credit shelter trust can be created from his or her estate. The surviving spouse can then receive income from the trust and may have access to the principal. When the surviving spouse dies, the assets in the credit shelter trust are distributed to heirs as directed in the trust document. Because the surviving spouse would have limited control over the distribution of the trust assets, those assets would not be considered part of his or her taxable estate. Annual gifting. A simple way to reduce estate taxes is through annual gifting. By gifting up to the $12,000 annual exclusion amount to individuals, you can remove those assets from your taxable estate. Learn more about gifting. Life insurance. Even though life insurance proceeds are income-tax-free for your beneficiaries, if you own the policy, the death benefit will still be part of your taxable estate. However, if your children (or other beneficiaries) own the policy, the proceeds are free from federal estate and income taxes. That means if you make gifts to your children (or other beneficiaries) to acquire the insurance, the proceeds from the policy are not part of your taxable estate. Learn more about life insurance. Irrevocable life insurance trust. Another way to make sure your life insurance proceeds are not part of your taxable estate is to establish an irrevocable trust to own the policy and make gifts to the trust to fund the policy. When you die, the life insurance proceeds are paid into the trust and distributed according to your directions. Those proceeds are not included in your taxable estate and are available for distribution to your family or can be used to pay estate taxes. Learn more about using trusts as part of your
estate plan.
How Your A.G. Edwards Financial Advisor Can Help
To develop a solid estate planning strategy, it's important for you to work closely with your team of advisors, including your attorney, qualified tax advisor and Financial Advisor. If you include trusts in your estate plan, be sure to ask your Financial Advisor about the services A.G. Edwards Trust Company* can provide. Note: A.G. Edwards does not provide legal, accounting or tax-preparation advice. You should consult your tax and legal advisors for your specific situation.
*A subsidiary of Wachovia Corporation and an affiliate of A.G. Edwards
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