The federal estate tax is imposed on estates exceeding $5 million. And once you’ve got estates of that size, many people become inclined to find ways to reduce their estate tax.
The researchers at FindLaw, while no replacement for a qualified New York estate planning attorney, have put together a list of some general ideas on strategies for reducing estate tax. Five of these estate tax reduction strategies are:
- Marital Transfers. Generally, lifetime gifts and bequests at the time of death to one's spouse are not subject to estate taxes.
- Lifetime Gifts to Children. Each person can usually make annual lifetime gifts up to $13,000 for each of their children without incurring a gift tax. This will reduce your taxable estate at death. If you take this approach you have to start a few years in advance.
- AB Trust. This is where each spouse leaves their property to an irrevocable trusts. A complicated but sensible idea, the AB Trust was discussed at greater length earlier on this blog.
- Uniform Transfer to Minors. This is a form of gifting used where children are still minors. The gift is given to a custodian for the benefit of the child, and is distributed to the child when he/she reaches the age of majority. The tax benefits are similar to that of lifetime gifts.
Estate planning to reduce estate taxes is a personal decision. These strategies may not be applicable to everyone, and you will want to speak with an estate planning attorney to help determine which is best for you.
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