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Advanced Estate Planning
If you are single and your net worth is over $2,000,000 or if you are married and your total net worth as a couple is over $4,000,000, you need to consider advanced estate tax planning for the maximum tax savings upon your death. A federal estate tax return must generally be filed for the estate of every U.S. citizen or resident whose gross estate and taxable gifts exceed $2,000,000 in 2006, and for subsequent years as follows:
Decedent dying in |
Exclusion amount |
2006, 2007, and 2008 |
$2,000,000 |
2009 |
3,500,000 |
2010 |
repealed |
2011 |
1,000,000 |
The tax rates are lowered and the exemption is raised between 2006 and 2009. Then, the tax is completely eliminated in 2010. However, this structure is scheduled to sunset at the end of 2010, and the old structure will return in 2011 with a federal estate tax exclusion of only $1,000,000 and a maximum tax rate of 55% on all taxable assets.
To calculate the estimated federal estate tax on your estate, use the following chart:
Federal Estate and Gift Tax Chart
If the net amount is: |
Tentative tax is: |
From |
To |
Tax + |
% |
On excess over |
$ 0 |
$ 10,000 |
$ 0 |
18 |
$ 0 |
10,001 |
20,000 |
1,800 |
20 |
10,000 |
20,001 |
40,000 |
3,800 |
22 |
20,000 |
40,001 |
60,000 |
8,200 |
24 |
40,000 |
60,001 |
80,000 |
13,000 |
26 |
60,000 |
80,001 |
100,000 |
18,200 |
28 |
80,000 |
100,001 |
150,000 |
23,800 |
30 |
100,000 |
150,001 |
250,000 |
38,800 |
32 |
150,000 |
250,001 |
500,000 |
70,800 |
34 |
250,000 |
500,001 |
750,000 |
155,800 |
37 |
500,000 |
750,001 |
1,000,000 |
248,300 |
39 |
750,000 |
1,000,001 |
1,250,000 |
345,800 |
41 |
1,000,000 |
1,250,001 |
1,500,000 |
448,300 |
43 |
1,250,000 |
1,500,001 |
2,000,000 |
555,800 |
45 |
1,500,000 |
2,000,001 |
2,500,000 |
780,800 |
49 |
2,000,000 |
2,500,001 |
3,000,000 |
1,025,800 |
53 |
2,500,000 |
3,000,001 and up |
— |
1,290,800 |
55 |
3,000,000 |
While certain deductions are allowed in computing the amount of the estate subject to tax (such as funeral expenses, administrative costs, gifts and bequests to religious, charitable, and fraternal organizations or government welfare agencies, and state inheritance taxes) it is still advisable to do advanced estate planning for the reduction or complete elimination of a federal estate tax.
Depending on your situation, advanced planning techniques may include irrevocable life insurance trusts, business succession planning, limited liability corporations, charitable remainder trusts, to protect assets and keep financial information confidential, in addition to your individual or family revocable living trust. You may also want to consider a gifting plan to reduce taxes on large estates. These approaches can help reduce or entirely eliminate the burdensome federal estate tax so your heirs will not be force to pay thousands of dollars out of their inheritance.
Orange County Estate Planning Law Firm
Remember, when dealing with the IRS rules and regulations, you want an attorney who will suggest the most effective plan for your tax situation and your personality. Some want more aggressive strategies for tax planning while others want to take a conservative approach. MORTENSEN & REINHEIMER, PC will discuss these options with you, and help plan and draft your advanced estate plan according to your specific needs.
Contact Our Law Firm
Call the estate planning attorneys at MORTENSEN & REINHEIMER, PC today at (714) 573-7149, or send an e-mail to info@ocestateplanning.net, and we will contact you to set up a free initial consultation.
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