Everyone that defines themselves as "middle income" or higher should be concerned about estate taxes. For every penny you have over $650,000 at death, the government will tax your estate (starting at 37% , rising to 55% as your estate gets larger).
With a rising stock market and rising home values, more people are exceeding this $650,000 amount everyday.
If you are only slightly above this threshold (e.g. you have an estate of $800,000) then it's easy to gift the excess (subject to IRS limits) to your beneficiaries now and avoid the estate taxes. By the way, a living trust does not avoid estate taxes.
If you are substantially over this amount, your estate is probably growing faster than your gifts will reduce your estate (non-taxable gifts are limited to $10,000 per year per recipient). So how do you avoid estate taxes?
Rather than waiting to use your $650,000 exemption, you can use it now. For example, let's say you have today $650,000 of stock that will be left in your estate. If you gift it today, you can use your exemption and give it away tax free. If you wait, the stock could double in value over the next 10 years and then you have an even bigger estate tax problem.
You may be reluctant to give up control of the stock through a gift and you do not need to give up control. The gift can be made in the form of a trust which you or your spouse can tap into if needed, or you can continue to control the stock through a family limited partnership and continue to receive income.
Do not delay in learning about your alternatives and which is best for you. You never know when our estate will be settled and you have the choice of having your family enjoy your hard-earned money or paying it in taxes. Which would you rather do?
For an article on basic estate planning ideas, check off on the coupon. If you want to really understand the options, please check off to schedule an individual appointment.
(By the way, the $650,000 exemption grows to $1 million in 2006. This probably will not help you save estate taxes because your estate may be growing just as fast as this 6.3% annual increase in the exemption).