I once heard the comic, Henny Youngman, say that he had a fast method for doubling the money in my pocket, “Just take it out, fold it over, and put it back in your pocket.” Here’s a potential method for increasing assets instantly that’s no joke.
Most everyone knows that there’s an estate tax for an individual’s estate that exceeds $675,000 (this amount is scheduled to rise to $1 million by 2006, if Congress does not change it again). So let’s say, hypothetically, that someone has an estate of $2,675,000. The $2 million “excess” will be taxed at 50% (the blended rate is actually less, but this hypothetical example will be easy to follow if we use a flat 50% tax). The tax will be $1 million. So, of the $2 million, the IRS gets half and the beneficiaries get half. Stated another way, if you want to leave $1 million to heirs, you need to set aside $2 million.
Here’s a better idea. Leave the funds prior to death and the tax bill declines A LOT! If you give a gift of $1 million to your heirs, they pay NO TAX. The IRS assesses the giver the 50% tax. So you would pay $500,000 in tax (50% of $1 million).
Therefore, to leave $1 million at death, you need $2 million. To leave $1 million before death, you need $1.5 million.
This is one of hundreds of simple estate planning ideas that many people never learn. If you would like more of these simple ideas that can potentially save huge amounts, please check off on the coupon to schedule an appointment for an estate review.