Avoiding Estate Tax

The terms estate taxes, death taxes and inheritance taxes are often used interchangeably. These are taxes levied by government agencies. They have nothing to do with probate. Most families don’t have to worry about estate taxes, because the federal government doesn’t impose payment of the tax on "smaller estates". Big estates can often avoid actually paying an estate tax by simply using the legal tools a lawyer has available for advanced estate planning.If you pay estate taxes, you are voluntarily paying them, because if you plan for them, you don’t have to pay them. The rich do their planning, so that they don’t have to pay any estate taxes. You can do the same thing.

Technically, every dime of a deceased person’s estate is subjected to the estate tax, and a tax is actually imposed. Even though an estate tax is actually calculated for every estate, most people don’t actually pay any estate tax, because the IRS gives everybody a "credit" that can be used to offset any estate tax imposed. The estate tax "credit" limit changes almost every year. The estate tax brackets and the rates within each estate tax bracket don’t change. It is actually the credit amount that changes.

In the IRS code, the gift tax and estate tax are "unified", thus the credit is called the "unified credit". You will have to actually look up the unified credit amount each time you want to know what it is, because it changes often. The amount of property that generates an estate tax equivalent to the amount of unified credit available to offset the estate tax is called the "exemption equivalent". People often say, "You can pass $2 million without an estate tax". They are really saying that the unified credit will offset the tax generated by the first $2 million in property passed through a gift or estate inheritance.

An individual can have a taxable estate and still be struggling day to day, because the estate includes the house, stocks, bonds, all the other real estate, the 401(k), IRAs, the little business, the life insurance face values, all of the personal collectables, and every other asset you can think of. Most people don’t think the life insurance is included, but in most cases it is included in the estate tax calculations. Inflation allows estate values to gradually increase, and many families are shocked when they actually end up paying estate taxes after dad dies. People don’t really realize that the first dollar above the exemption equivalent is subject to a near 50% estate tax. That means that an estate which is only $500,000 above the exemption equivalent amount will generate a payable estate tax of about a quarter of a million dollars. Attorneys aren’t cheap, but getting an extra $250,000 to your family makes their motley $10,000 bill look like a great deal.

Lee R. Phillips’s FREE DVD, Using the Law to Make Money and Protect Your Assets, coupled with his new book, Guaranteed Millionaire, shows you how to remove life insurance from the estate tax problem. They also show a couple how to get twice as much unified credit by using a properly drafted living revocable trust.

If removing the life insurance from the estate tax exposure and being able to pass twice the exemption equivalent doesn’t solve your estate tax problem, other options are available. Some of the other options you have are Family Limited Partnerships, Corporations, and LLCs. These and other tools are exposed in detail in the FREE DVD and book. They let you eliminate estate taxes and get a ton of asset protection. Get Guaranteed Millionaire and the FREE DVD, Using the Law to Make Money and Protect Your Assets, now and eliminate estate taxes, plus get asset protection.