best way to protect assets from estate taxes

[bondi688]

How many are planning to or have made move to take advantage of the generous life time gift tax exemption due to expire in 10 days?

 

[MooreBonds]

Although it's not as great of an idea these days given where rates are (but could still be a good deal depending on your estate size relative to the exemption), one way back in the day (with higher interest rates and a much smaller estate tax exemption) to really reduce your taxable estate somewhat 'quickly' was to buy Savings Bonds. You could purchase up to the annual gift limit each year and name you as the primary owner, and an heir (child, sibling, parent, anyone) as a co-owner. If you have just a few heirs (and a spouse), it can add up pretty quickly for the $/year you can technically shift out of your taxable estate, yet still retain FULL control over.

When you pass on, the heir immediately owns the bond, and simply cashes it in whenever (if they are listed as a beneficiary, all they do is show your death certificate when they cash it in). In the meantime, you as original owner still own full control over the money and can cash it in whenever you need or want to. Otherwise, it can pass immediately to your heir and stay outside of your estate. The only 'bad' part is that if you don't declare your accumulated interest each year, then whomever cashes it in will have a big slug of interest to declare in income the year it's cashed in.

The only 'downfall' of this plan is if one of the heirs passes on at the same time or shortly after the original owner passes on. It's not a huge ordeal - would just require probating the savings bond - but if you have many heirs to divide up your estate to, it can quickly whittle down the tax bill!

 

[kaneohe]

3. Marital trust are particularly useful for many reasons.
- one spouse may not want the other spouse to permanently end up with his
or her assets...but would like that spouse to be able to enjoy any income
produced from said trust during their life. At the death of the 2nd
spouse...said assets will be routed based on the wishes of the first spouse.

sheehs1.........I think this type of trust is more properly called a QTIP.
Not all marital trusts are QTIPs so marital is not specific enough.
How Marital Trusts Work - For Dummies

 

[pb4uski]

My parents each have living trusts that operate as described. Since my Dad passed the income and principal available in his living trust is available to my Mom if she needs it, but once she passes the trust document requires the successor trustees (sis and I) to liquidate the assets and distribute it in equal parts to us kids.

Same thing for Mom's trust.

IIRC it was a way to double up on the estate tax exemption at the time.

I prepare a separate trust return for Dad's trust where all the income for the year is passed through to Mom on a K-1.

 

[imoldernu]

The IRA pitfallEstate Planning Pitfall ? A trust is the beneficiary of an IRA or retirement plan
This is the "stretch" mentioned in a previous post.

 

[gcgang]

In the words of the Red Hot Chili Peppers, "Give it away, givitaway,givitaway, givitway...."
But for all practical purposes, if your household Net Worth is less than $3.5mm, don't worry, be happy.

 

[kaneohe]

Although it's not as great of an idea these days given where rates are (but could still be a good deal depending on your estate size relative to the exemption), one way back in the day (with higher interest rates and a much smaller estate tax exemption) to really reduce your taxable estate somewhat 'quickly' was to buy Savings Bonds. You could purchase up to the annual gift limit each year and name you as the primary owner, and an heir (child, sibling, parent, anyone) as a co-owner. If you have just a few heirs (and a spouse), it can add up pretty quickly for the $/year you can technically shift out of your taxable estate, yet still retain FULL control over.

When you pass on, the heir immediately owns the bond, and simply cashes it in whenever (if they are listed as a beneficiary, all they do is show your death certificate when they cash it in). In the meantime, you as original owner still own full control over the money and can cash it in whenever you need or want to. Otherwise, it can pass immediately to your heir and stay outside of your estate. The only 'bad' part is that if you don't declare your accumulated interest each year, then whomever cashes it in will have a big slug of interest to declare in income the year it's cashed in.

The only 'downfall' of this plan is if one of the heirs passes on at the same time or shortly after the original owner passes on. It's not a huge ordeal - would just require probating the savings bond - but if you have many heirs to divide up your estate to, it can quickly whittle down the tax bill!

This might get the bonds out of your probate estate but I doubt that it gets out of taxable estate........... Individual - Series EE/E Savings Bonds Tax Considerations

 

[Corporateburnout]

In the words of the Red Hot Chili Peppers, "Give it away, givitaway,givitaway, givitway...."
But for all practical purposes, if your household Net Worth is less than $3.5mm, don't worry, be happy.

Unless you live in one of the 14 states with estate tax laws that have limits well below the federal exemption of $3.5M. The exemption limits in these states range from $338K in Ohio to $2.75 in Vermont. So make sure to check your state estate tax laws.

 

[ERD50]

... one way ... to really reduce your taxable estate somewhat 'quickly' was to buy Savings Bonds. You could purchase up to the annual gift limit each year and name you as the primary owner, and an heir (child, sibling, parent, anyone) as a co-owner. If you have just a few heirs (and a spouse), it can add up pretty quickly for the $/year you can technically shift out of your taxable estate, yet still retain FULL control over ...

As I understand it, if you maintain full control, then it is not out of your estate. Think about it, it's just too easy that way. 'Out of your estate' means just that - it's gone, and you cannot get your mitts on it.

-ERD50

 

[Original Wally]

Interesting topic. DW and I **DID** go the A-B Revokable Living Trust route. For a variety of reasons. Estate tax was NOT one. Our joint estate is right at $1 million, and our plan is to SPEND SPEND SPEND whilst we can. (JUST got back yesterday from 10 days on Oceania Riveria cruise to western Carib.) Reasons for us, flexibility in makiing changes, EASE of settlement on 2nd death, privacy, LESS ability for anyone to contest than a will. Things like that.