Exclusion of Property from the Gross Estate
As we learned from previous lessons, the gross estate is the total fair market value (FMV) of all interests and property held or owned by the decedent at the time of their death. In order to avoid potential estate tax liability, individuals can employ several different techniques to reduce the size of their gross estate. They include some of the following methods:
Estate Reduction Techniques:1) Transfer Life Insurance Ownership – Life insurance proceeds can be removed from the potential gross estate by transferring ownership to someone other than yourself.
2) Retitle Assets – Transfer or retitle assets to the name of your spouse or another individual.
3) Irrevocable Trusts – Irrevocable trust transfers are a completed gift. Revocable trusts are not completed transfers because the donor has retained the power to demand return of the trust property.
4) Life Insurance – Life insurance can be purchased in an amount equivalent to pay the estimated estate taxes are expected to incur.
Be aware of the Three-Year Rule:In section 2035 of the United States Tax Code, assets transferred or retitled within three years of your death will be (in most every case) brought back for inclusion in the gross estate of the decedent if they die with three years of the transfer.
Lifetime Gifting Strategies
InsuranceDecrease the value of your taxable estate and prevent the tax man from getting you one last time.
Financial AdvisorInheritance is a double-edged sword, as leaving money can create estate tax burdens. Opting for a life insurance plan can help mitigate those burdens.
TaxesThe 2010 estate tax lapse could be costly to your family if it keeps you from planning.
Financial AdvisorThe estate tax is frequently misunderstood. Learn more details about exactly how estate, or inheritance, taxes work in the United States.
RetirementMany people try to avoid this process altogether, making things difficult for heirs.
Financial AdvisorPeople considering application for Medicaid can put their biggest asset - their home - in a trust that splits ownership of the property.
RetirementThis article explains the difference between the two estate transfer methods -- a will and a trust, and the circumstances under which each can be used.
Managing WealthOnly put your assets in an irrevocable trust for one of these three reasons.