Advanced estate planning is a good option for individuals and families who have a larger net worths and desire not to pay significant estate taxes when they pass away. Such high net worth individuals generally have assets totaling near five million dollars, as the current federal gift tax exemption is $5.43 million per individual (doubled for married couples).
Keep in mind that the gift tax exemption does include lifetime gifts made to others (including family) that exceed the annual gift tax exclusion for the year the gift was made. In other words, gifts under the annual exclusion limit (which is currently $14,000) do not require disclosure and are not counted toward the $5.43 lifetime tax-free gifting limit. However, gifts over the annual limit must be disclosed by filing a gift tax return for the respective taxable year and are counted toward the $5.43 lifetime tax-free gifting limit.
Advanced estate planning tools may be used to reduce your taxable estate (or the taxable assets you own at death) by removing assets from your estate by voluntarily placing them in the control of other individuals such as trustees. Such transfer must occur inter vivos, or during your lifetime. One such advanced estate planning tool may be the irrevocable trust. The irrevocable trust may be used in conjunction with other planning tools such as the qualified personal residence trust and/or the irrevocable life insurance trust to achieve supreme planning objectives.
Another way to reduce your taxable estate which may have significant real estate is by using defective grantor trusts in conjunction with limited liability companies and/or other legal entities. By doing so, you transfer the ownership of the real estate you personally own and therefore reduce your taxable estate.
Contact the Attorneys of The Noble Law Firm, P.A. to discuss your estate planning needs and whether you should utilize advanced estate planning to distribute your assets to the next generation.