Among most estate planning attorneys, the term “advanced estate planning” refers to planning necessary to limit, or eliminate entirely, the federal estate tax.
Even in 2011 with the individual unified credit amount set at $5,000,000 (i.e. coupon), advanced planning may be necessary.
Why is advanced estate planning still necessary for some families?
- Because the coupon is only set at $5,000,000 in 2011 and 2012. This means that you have to die this year or next. In 2013 and beyond, the coupon is reduced to $1,000,000 and a lot of American families will be affected.
- Because all of your assets are counted at your death: real estate, investment accounts, stocks, bonds, annuities, life insurance, debts owed to you, business interests, and monies stemming from your cause of death such as medical malpractice lawsuits and wrongful death actions.
Types of advanced planning tools
- Often irrevocable life insurance trusts are used to get the value and proceeds of life insurance out of an estate. If set up in a state that has abolished the rule against perpetuities, the trust can go on forever, never being subject to the federal estate tax (or creditors.) This is called a “Dynasty Trust.”
- Charitable trusts such as the charitable lead trust and charitable remainder trust are also often used. Together, they can zero out the federal estate tax and carry out charitable goals as well as tax savings goals.
- A qualified personal residence trust may be used to get the value of up to two personal residences out of an estate.
- A formal gifting program is often used. In fact, super wealthy families are using their unified credit this year (or next) and gifting up to $5,000,000 into trusts for loved ones now. This is doubled to $10,000 for married couples.
A gifting program may also include using the annual exemption amount which in 2011 is $13,000 ($26,000 for married couples).
As your estate planning attorney if advanced estate planning is right for you.