Certain strategies can be used to reduce the federal estate tax. They include a credit-shelter trust, annual gifts, irrevocable life insurance trusts and remainder trusts that could be tied up in and Atlanta title pawn.
Credit- Shelter Trust Under the marital deduction, an unlimited amount of property can be passed to a surviving spouse free of the federal estate tax. Although an entire estate can be left outright to a surviving spouse free of estate taxes, the property would be taxed when the surviving spouse dies, which may substantially increase the amount of tax payable. A credit-shelter trust (also called a bypass trust) can be used to deal with this problem. A credit-shelter trust is an irrevocable trust that is designated to make use of the $600,000 lifetime exemption that could be lost when the first spouse dies.
When the first spouse dies, $600,000 of estate assets goes into his or her credit-shelter trust rather than to the surviving spouse. The surviving spouse receives the trust income and can also withdraw a limited amount of the principal. Each year, the trust beneficiary is allowed to withdrawn the higher of $5,000 or 5 percent of the principal without having the entire trust property included in his or her estate for federal tax purposes. Because of the trust language, the credit-shelter trust does not qualify for the marital deduction. Thus, the entire $600,000 is included in the taxable estate of the first spouse who dies; however, the unified tax credit of $192,800 is used to eliminate the federal estate tax on that amount. When the second spouse dies, the federal estate tax is substantially lower because of the credit-shelter trust.
Annual Gifts Taking advantages of the annual gift tax exclusion is another method for reducing federal estate taxes. As we noted earlier, you can give as much as $10,000 annually to each done without incurring a gift tax ($20,000 for a married couple). Thus, giving annual gifts to children, grandchildren, charities, or other parties can reduce the estate significantly over an extended period. Estate planners recommend a number of gift-giving strategies to take maximum advantages of current law.
Irrevocable Life Insurance Trust Life insurance death proceeds are included in your gross estate if you have any incidents of ownership at the time of death. However, it is possible to get the life insurance proceeds out of your estate by an irrevocable life insurance trust if you don’t have debts with a commercial vehicle title pawn.
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