Estate Planning

No matter what your net worth is Estate Planning is a crucial component in your financial planning to have a basic estate plan in place.

Seniors who have created wealth through their lifetime need to protect their assets. Estate taxes on Death of the Surviving Spouse start at 37% after the personal or marital exemption has been deducted from their gross estate. The estate tax can go as high as 80%. The best way to protect your estate from erosion is Gifting. You may gift out of your estate up to 12,000 (updated 2004) per individual each year. You may gift directly to your family members or gift to a trust.

There are many different types of trusts to gift to. They must be irrevocable, which means you no longer control the asset, in order that it not be included in your estate. The two basic irrevocable trusts used to expand an estate are Irrevocable Life Insurance Trust (ILIT) and the Dynasty trust. The basic use of the ILIT is to hold enough life insurance to expand the estate to the Estate Tax Liability.

The dynasty trust usually limited to the ultra wealthy is also an ILIT but is used primarily as a family bank account to provide a combination of income and principal to children, grandchildren, and great grandchildren. Both trusts use the gifts of the Donor to purchase life insurance. These trusts create a method, which is the least expensive way to pay the tax collector for estate taxes.

A Revocable Trust gives you control over all the assets listed in it. It avoids the costly probate when you die. Plans, which designate need of beneficiaries automatically, avoid probate.

The federal estate tax exemption -- the amount you may leave to heirs free of federal tax -- is rising gradually, from $1.5 million in 2004 to $3.5 million in 2009. Meanwhile, the top estate tax rate is coming down. The estate tax scheduled to phase out by 2010, but it will only be for that year. Unless Congress decides to pass new laws between 2005 and 2010, the tax law will reinstate in 2011. This will only allow us to leave our heirs $1 million dollars tax-free money at that time.

Reducing and delaying the payment of taxes enables us to provide more income for our senior clients. For seniors their greatest concern is that their assets may not last as long as they will. The Golden Rule of 100 is taking your current age and subtracting that from age 100. This indicates how much investments should be at risk.