 Estate & Gift PlanningA little planning can save thousands of dollars! You may be aware of the lifetime exclusion for gifts and estates, which is to be increased annually up to $1,000,000 by the year 2006 and to $1,300,000 for qualifying family farms and small businesses. But the amount over that may be taxed at rates starting at 37% and going as high as 55%. You may be surprised what your estate is worth. Add up the value of all your assets. Don't forget life insurance which may fall into your estate. If your total value exceeds the exclusion, you should look into what a few simple planning techniques can save your family at estate time.
In addition, there are some very effective estate planning ideas that can also cut your current income tax bill. Some planning possibilities: Current tax law allows you to give away $10,000 per year per recipient. Your spouse may join in the gift even if he or she is not an owner in the transferred asset. This means that you could transfer up to $20,000 per year to each of your heirs. To double the annual exclusion yet again, you may want to include spouses of your children. The person receiving the gift does not need to be related to you. These annual gifts do not reduce your once-in-a-lifetime exclusion. If you have property which is not needed for your retirement, maybe it is a candidate for transferring during your lifetime. If it is a large income-producer, the future income will be taxed to the new owner and not to you, plus the property will be out of your estate. You can make unlimited transfers to your spouse either during your lifetime or through your estate. There are no taxes on spousal transfers, regardless of size. But leaving everything to your spouse may not be a good idea, since doing so fails to utilize the lifetime exclusion amount in the estate of the first spouse to die. Planning will allow you to use the exclusion in both estates, and you'll be able to transfer twice as much to your heirs free of estate tax. With proper planning, certain life insurance proceeds can be kept out of your estate. How much do you need for retirement?
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