How do you handle the estate taxes in your Estate Plan?

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Most Americans will not have to pay the estate tax under the current laws. But what if you are taxable? What if you’ve acquired enough wealth to be at risk?


The three basic strategies are:


1. Delay the tax until the second death

2. Remove things from your estate during life

3. Make someone else pay the tax Nothing is taxed that is given to our spouse.


So we can leave everything to them and then hope they spend enough money during life to not have to pay the tax. The spouse could also do some planning as well and deal with it in other ways. You can leave it in a trust to benefit your spouse if you worry they will remarry. The next strategy is to get things out of our estte. We are only taxed on the value of our estate. Anything that we remove from our estate within 3 years of our death is not counted in this total. The most common ways to do this would be to give them to heirs (or in a trust for heirs) or to sell them to a trust or an outsider. This is most common for businesses and real estate.


This way, we can either get them out of our estate in the form of a gift or minimize their value. If we sell them, then only the purchase price (even if it is financed and the buyer pays us payments) is included in that overall estate amount. The final method is to make someone else pay for it. This is usually an insurance company. Most commonly, a life insurance policy is used. This policy is placed in a trust so that it isn’t included in the estate. The premiums are cheaper than the tax. The death benefit that comes in once you die is used to pay the taxes.

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