Understanding Estate Taxes
How To Reduce Or Eliminate Your Estate Cost
15. 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, doubling the amount protected from estate taxes and saving a substantial amount for your loved ones.
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 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
Limited Liability Company / Family Limited Partnership
• 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, creditors, 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 and/or replace charitable gifts
• Death benefits not included in your estate