Discount The High Cost of Estate Taxes
Estate taxes can be a devastating blow to many families if proper planning is not done prior to death. Currently, the maximum estate tax rate for 2009 is 45%. Assets above the $3,500,000 exemption for an individual ($7,000,000 for married couples with a properly structured estate) are taxed at death. In 2010, the estate tax will be eliminated entirely for that year.
Under current tax legislation, the estate tax returns in 2011. The estate tax exemption level drops back to the old $1,000,000 exemption ($2,000,000 for married couples) and any assets above that incur the estate tax. Additionally, the estate tax rate will return to its old maximum level of 55%. View the Federal Estate Tax Rates Overview.
Estate taxes must be paid by your family within nine months of the death of you and your spouse in cash. If you have not arranged to pay these taxes, your family may be forced to liquidate assets or borrow money to pay the estate taxes. Your hard earned assets could be severely reduced and your heirs may only receive a fraction of what you have taken a lifetime to build.
Example:
John (age 70) and Mary (age 65) Client, over their lifetime, have built an estate valued at $10,000,000. Their estate taxes in 2011, according to the current tax structure, will be approximately $4,000,000. After taxes, their heirs will inherit the remaining $6,000,000.
Solution:
They can transfer $900,000 to an Irrevocable life insurance trust (gift tax free). The trust then purchases a last-to-die life insurance policy on them for $4,000,000. Upon their deaths, the trust receives $4,000,0000 in cash from the life insurance policy - income and estate tax free. These cash proceeds can then be used to pay the estate taxes.
Their heirs receives $9,000,000 from the estate as opposed to $6,000,000. They have just effectively “pre-paid” their estate taxes of $4,000,000 with $900,000 - an effective discounted rate of 77%.
Contact us for a complementary, no obligation analysis of your personal situation and a proposal on how this program could effectively discount the costs of your estate taxes.
