Estate Tax Planning

To the extent that estate planning is about “how much you leave behind”, it makes sense to keep your taxes to a bare minimum.  Why pay taxes if you don’t have to?

Not every person’s estate will owe estate taxes when they die.  And for those who are exposed, estate taxes are a big deal.  But many people have a false sense of security and underestimate their exposure to estate taxes.   There are three primary reasons:

  1. Your estate may be larger than you think.  People are accustomed to thinking about their net worth.  But they often forget about life insurance, which can increase the size of their estate substantially.
  2. The federal estate tax gets all the headlines, but Illinois has an estate tax too.  The federal estate tax has a fairly high $5 million exemption in 2011.  But any estate over $2 million pays Illinois estate taxes.  And the Illinois tax rises pretty rapidly once you’re over $2 million.  For example, an estate of just $2.5 million owes $128,518 to the Illinois Department of Revenue.
  3. The current federal estate tax rate of 35% may not sound like much compared to the recent 45% and 55% rates.  But even at 35%, an estate that is only $300,000 over the federal exemption limit will owe over $100,000 in estate taxes.
The good news is that estate taxes can be reduced,
or often avoided entirely.

We have many tools at our disposal to ethically and legally reduce or eliminate your federal and Illinois estate taxes.

  • Revocable Living Trusts.  A revocable living trust can help married couples exclude an additional $2,000,000 from being exposed to Illinois estate taxes.
  • Annual Gifting.  The formal name is the Annual Gift Exclusion, but many people just know it as the $13,000 gifting rule.  You are allowed to give $13,000 to as many people as you like each year.  But the gifts don’t have to be made directly.  They can also be made using one of several kinds of gifting trusts, and there are several advantages to doing so.
  • Charitable Gifting.  Imagine a world where the IRS matched your gifts to charity, 35 cents for each dollar you gave.  Sounds crazy, right?  But that’s basically what happens when you make gifts to charity as part of your estate tax plan.  And with advanced charitable planning, both you and your charity of choice can get more mileage out of your charitable giving.
  • Advanced Strategies.  There are estate tax planning strategies that go far beyond gifting and charitable planning, including dynasty trusts, qualified personal residence trusts (QPRTs), grantor retained annuity trusts (GRATs), family limited partnerships (FLPs), installment sales to grantor trusts, and more.

We make planning for estate taxes simple and easy.  Our processes allow you to make well-informed decisions without getting a law degree on the side (and there won’t be any vocabulary quizzes either).

Like a lot of things in life that relate to money, these tools work much better when given time to mature.  To get started now, contact us to schedule your free, no-obligation Discovery Session.