Deferral And Minimization Of Estate Taxes - Exclusion of Property from the Gross Estate

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


Related Articles
  1. Options & Futures

    How To Avoid Taxation On Life Insurance Proceeds

    Decrease the value of your taxable estate and prevent the tax man from getting you one last time.
  2. Retirement

    Estate Planning: Life Insurance In Estate Planning

    by Cathy Pareto, CFP®, AIF® (Contact Author | Biography) Uses of Life InsuranceLife insurance is present in almost every estate plan and serves as a source of support, education-expense ...
  3. Personal Finance

    Which Estate Transfer Technique is Right for You?

    This article explains the difference between the two estate transfer methods -- a will and a trust, and the circumstances under which each can be used.
  4. Retirement

    How Much Will You Owe on Your Inheritance?

    Estate planning can be unpleasant, but in order to get the full benefit of what you've inherited, it’s important to be prepared for the related taxes.
  5. Taxes

    4 Ways To Minimize Estate Taxes

    These four strategies will ensure that most of your money goes to your loved ones, and not to the government.
  6. Retirement

    Establishing A Revocable Living Trust

    This arrangement allows you to have more control over your estate - both before and after your death.
  7. Taxes

    Tax-Efficient Wealth Transfer

    Taxpayers with large taxable estates were required to take steps to reduce them before 2011.
  8. Personal Finance

    Common Estate Planning Mistakes

    Estate planning requires careful consideration over the course of years.
  9. Retirement

    Estate Planning: Marital And Non-Marital Trusts

    by Cathy Pareto, CFP®, AIF® (Contact Author | Biography) Before we begin talking about these types of trusts, let's first begin by introducing the term "unlimited marital deduction." ...
  10. Financial Advisors

    Estate Planning Tips for Financial Advisors

    Estate planning is not a set-it-and-forget-it proposition. Here are some tips for you and your clients.
RELATED TERMS
  1. Three-Year Rule

    Section 2035 of the tax code, which stipulates that assets that ...
  2. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  3. Gross Estate

    The total dollar value of all property and assets in which an ...
  4. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
  5. Adjusted Gross Estate

    The net worth of the deceased's estate after deducting the cost ...
  6. Transfer

    A change in ownership of an asset, or a movement of funds and/or ...
RELATED FAQS
  1. What is estate planning?

    Estate planning involves making plans for the transfer of your estate after death. Your estate is all the property that you ... Read Answer >>
  2. What is the difference between a revocable trust and an irrevocable trust?

    Find out more about irrevocable trusts, revocable trusts and the main differences between them. Read Answer >>
  3. How can I make equity investments in real estate?

    Invest in real estate equity through buying and selling real property or through other more liquid investments like real ... Read Answer >>
  4. What financial metrics are best for evaluating companies in the real estate sector?

    Learn about some of the most important financial metrics and other analytic tools before investing in a real estate company ... Read Answer >>
  5. What is the difference between the death benefit and cash value of an insurance policy?

    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
  6. How much of the global economy is comprised of the real estate sector?

    Find out how much of the global economy consists of the real estate sector, including output from commercial and residential ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center