| |
|
|
|
|
Term Life Insurance by Top
Rated Companies
More term companies
equals the best opportunity to obtain the lowest term quote!
Offering the Largest Selection of
Top-Rated Companies Instantly!
Why is this important?
Personalized
Tele-Application for All Companies, Right Over the
Phone!
For the serious shopper who would like a seasoned
professional to assist them-
"how term life insurance
works", "return of premium term life insurance",
"no exam term life insurance" and "what is term life
insurance" will be explained on this page.
 |
Estate Planning Strategies?
|
|
|
looks at some ways you can plan for your assets to pass to
the people
you want in the manner you want at the least federal
estate tax cost.
Note: In all cases, when implementing an estate plan, legal advice is a must!
A credit shelter or by-pass trust can help both you and
your spouse take advantage of the estate-tax
credit and transfer up to $3 million in assets to your
children or other heirs free of federal estate tax. (The amount of assets you and your spouse together can transfer tax free
using the estate-tax credit exclusion amount increases
to $4 million in 2006–2008 and $7 million in 2009.) To
underscore the
value of this planning strategy, see our simplified
example,
A Case for a Credit Shelter Trust.
It shows what can happen when both spouses’ credits
aren’t used.
One way to make the most of your and your spouse’s
estate-tax credits is to arrange for your estate to
be divided into two parts at your death. One part would
pass outright to your spouse. The second part
of your estate is placed in a trust created by your
Will. This trust can pay your surviving spouse a
lifetime income and then benefit your children or other
named beneficiaries after your spouse’s death. You can
even give your spouse a limited power to withdraw trust
assets. Some people limit the amount in the credit
shelter trust to the credit exclusion amount so that any
tax on the trust will be offset by the credit.
At
your death, your estate-tax credit will be applied
against the assets in the credit shelter trust. If those
assets are less than or equal to the credit exclusion
amount, no estate tax will be due. And no tax is due on
the assets passing to your spouse, either, because of
the unlimited marital deduction. At your spouse’s death,
the credit shelter trust assets will pass to your
children or other trust beneficiaries.
The assets won’t be taxed as part of your spouse’s
estate. The assets that passed to your spouse
under the unlimited marital deduction will be included
in your spouse’s estate. However, your spouse’s credit
will be available to offset tax on some or all of those
assets.
The two-trust estate plan is another planning strategy
for couples that uses a credit shelter trust and
one other trust. This plan saves estate tax in the same
way a credit shelter trust alone does. But with a
two-trust estate plan, the assets that pass to your
spouse under the marital deduction are also placed
in a trust, rather than left to your spouse outright.
This “marital” trust may be a QTIP trust
(explained later), or it can be another trust qualifying
for the marital deduction.
|
|
In general, for property in the marital trust to
qualify for the marital deduction:
|
|
|
|
• |
All of the income must be payable to your spouse
at least as frequently as annually.
|
|
|
|
• |
If you don’t use a QTIP trust as your marital
trust, you also must give your surviving spouse
a general power to distribute the trust
property. |
|
You may give your spouse a lifetime power to distribute
trust property, or you can give your spouse the power to
distribute property only by Will. Other types of marital
trusts also may be used along with the credit shelter
trust.
A CASE FOR A CREDIT SHELTER TRUST
When
Gordon died, he had a taxable estate of $2.5 million
which he left to his wife, Katherine.
His estate paid no federal estate tax because of the
unlimited marital deduction. Gordon’s estate-tax credit
wasn’t used. On Katherine’s death in 2007, her taxable
estate also is worth $2.5 million.
Because Katherine didn’t marry again, the marital
deduction is unavailable to her estate. Katherine’s
estate claims an estate-tax credit, but this credit
effectively exempts only $2 million of her property from
tax. Katherine’s estate is subject to an estate tax of
$225,000. Using a credit shelter trust in Gordon’s
estate plan could have eliminated the tax on Katherine’s
estate.
With a Qualified Terminable Interest Property (QTIP)
trust, you can give your surviving spouse a life
income
and
choose who will receive the property in the trust
after your spouse’s death — your children
or grandchildren, for instance. Your personal
representative can elect to claim the marital
deduction for the trust property. For the trust
property to be eligible for the QTIP election:
|
|
• |
You must give your surviving spouse a
qualifying income interest for life.
|
|
|
|
• |
The assets may not be distributed to anyone
other than your spouse while your spouse is
alive. |
|
QTIP trust assets will be included in your spouse’s
estate, and your spouse’s estate may have to pay
estate tax on the assets. But the assets themselves
must be distributed as you have directed in your
QTIP trust agreement. Thus, you retain ultimate
control over who receives them.
A PLANNING TOOL
FOR TODAY
Today’s “blended” families can
cause additional estate planning concerns. Consider
David and
Anna, for instance. He has four children from a
former marriage. While David wants Anna to be
financially secure if he dies first, he also wants
his children to eventually receive what he feels is
their fair share of his estate. A good strategy for
David may be to create a Qualified Terminable
Interest Property (QTIP) trust in his Will. With a
QTIP trust, he can give Anna a life income and
ensure his children will receive the property in the
trust at Anna’s death. His estate can claim the
marital deduction for the trust property if his
executor so elects
While these trust strategies will help save estate taxes
before repeal takes effect in 2010, will they still
be beneficial
after
repeal? It depends. Most trust strategies do more than save
taxes — they also ensure that estate assets will be managed
carefully for the beneficiaries’ financial security. And family
issues may make trusts the most beneficial way to transfer an
estate. Moreover, unless Congress acts, repeal may only be
effective for 2010. Clearly, continuing professional guidance is
essential.
Life insurance plays a part in most estate plans. Make
sure you have sufficient coverage on your life for
family members to maintain their current lifestyle after
you’re gone. For larger estates that may be
subject to tax even when family trusts are used, life
insurance can provide the funds needed to pay
estate taxes without liquidating estate assets.
If
you have a substantial amount of life insurance, you may
want to create an irrevocable life insurance trust to
help beneficiaries manage the proceeds and potentially
reduce estate taxes.
You don’t have to wait until your death to make
tax-saving transfers. In fact, a well-planned program of
lifetime gifts to family, friends, and charity can save
estate and gift taxes, preserve more of your assets
for your family and other heirs, and ensure your
property goes to the people you want to have it.
The Gift-tax Annual Exclusion
Each year, you can give any number of people up to
$11,000 each in assets ($22,000 if your spouse joins in
the gift) without triggering any federal transfer tax —
gift, estate, or generation-skipping. This annual tax
exclusion is available in addition to your gift-tax
credit exclusion amount and is adjusted for inflation.
Suppose you make annual gifts of $11,000 to each of your
three children and seven grandchildren.
Over a five-year period, you can give them $550,000 tax
free. Having your spouse join in your gifts will raise
your tax-free gift total over five years to $1.1 million
and reduce the assets includable in your estate for
estate-tax purposes by $1.1 million — or more if the
assets appreciate between the time you make the gifts
and your death.
As
estate-tax repeal draws near, you also may want to
consider lifetime giving strategies that use the
gift-tax annual exclusion and unlimited marital
deduction to help family members make the most of the
new $1.3 million step-up available to all estates in
2010. If your mother, for example, has a small estate
relative to yours, consider using the gift-tax annual
exclusion to transfer appreciated assets to her so
that her estate can eventually allocate the basis
step-up to the assets before passing the assets back
to you. Note that you must make the transfer more than
three years before your mother’s death.
You can use a similar strategy if your spouse’s estate
is not large enough to fully use the $4.3 million basis
step-up available to surviving spouses. Here, the
unlimited marital deduction would allow you to make your
transfer all at once without any gift-tax consequences,
and the three-year rule wouldn’t apply (since it doesn’t
apply to spousal transfers).
Before choosing assets to give, talk with us. We can
help you weigh the potential estate-tax savings against
possible capital gains tax (discussed previously) so
that you can provide your family with the greatest
after-tax benefit.
Exclusion for Medical and Tuition Payments
The tax law also allows you an unlimited exclusion for
certain tuition and medical payments made on behalf of
others. To qualify for this exclusion, you must make the
tuition or medical payments directly to the educational
institution or medical facility. Payments for medical
insurance qualify for the exclusion. Payments for
dormitory fees, books, supplies, and similar school
expenses do not qualify for the exclusion.
Gifts
to Minors Trusts
Many people don’t feel comfortable giving large sums to
children or grandchildren. A living trust that
will hold and manage those sums until the child is more
mature may seem like a good idea. However, gifts of
“future interests” (gifts the recipient isn’t able to
use or enjoy until some time in the future) don’t
qualify for the annual exclusion. Gift tax is imposed
regardless of the amount of the gift.
A
better strategy is to create a gifts to minors trust.
Gifts to these trusts qualify for the annual exclusion.
With a gifts to minors trust, you direct your trustee to
use the trust income and assets for the child’s benefit
— to finance his or her college education, for instance
— until the child reaches age 21. Then,
the child must be given the right to all the trust
income and assets. However, you can incorporate
Crummey
powers in the gifts to minors trust that will give the
child only a limited time to withdraw from the trust
when he or she reaches age 21.
Making charitable gifts during your lifetime or at your
death can help reduce estate taxes. You can make these
gifts either outright or in a charitable trust. If you
make a charitable gift in your Will, your estate can
claim an estate-tax deduction for the value of that
gift.
But, rather than waiting until your death, you may want
to consider making your charitable gifts now. Lifetime
gifts to qualified charities can provide income-, gift-,
and estate-tax savings, as well as help further the work
of organizations you believe in. Using a charitable
trust to make lifetime gifts can give
you a current income-tax deduction in addition to
removing assets from your taxable estate.
Charitable Remainder Trusts
With a charitable remainder trust, you transfer property
to a trust set up for the charity of your choice.
The trust pays you, you and your spouse, or someone else
you’ve chosen an income for life or a period of years.
The trust ends at the death of the last income
beneficiary (or earlier if that’s what the trust
specified), and the charity receives the property.
Charitable remainder trusts may have another advantage
after the estate-tax repeal. A charitable remainder
trust funded with appreciated low-basis property allows
the trust beneficiary to benefit from
the trust’s sale of the property without paying capital
gains tax. Replacing the value of the property given to
charity with insurance payable to a family member or
other loved one would allow you to make a tax-advantaged
gift to charity without “shortchanging” your family or
passing along a high capital gains tax liability.
Charitable Lead Trusts
If you
are currently making regular gifts to a favorite charity
— or would like to make regular gifts to a charity — you
may find it to your advantage to use a charitable lead
trust for those gifts. A charitable lead trust pays
income to the charity of your choice for a set period.
At the end of that period, the trust assets pass to the
person you’ve named as the trust’s remainder beneficiary
— your child or grandchild, for instance. Again, both
the charity and your heirs benefit.
Author’s note:
The intent of this article by termlifeamerica.com is to
inform and motivate the general public into action.
One should consider only a qualified practicing legal individual or
entity, in the state in which you reside, to establish properly
drawn documents of this type.
SEE
Estate Planning Brochure
Related:
|
|
|
|
Find us on Facebook 
Find us on Google+
Follow us on Twitter
