There is no one-size-fits-all estate plan, because every situation is different. Steps that one person must take would not be necessary for the next. This comes into play when it comes to estate tax efficiency strategies.
The federal estate tax is potentially applicable on large estates. In 2015, the amount of the federal estate tax exclusion is $5.43 million. You can transfer up to $5.43 million tax-free, but anything that you transfer that exceeds this amount may be subject to the estate tax.
There is an unlimited marital deduction that allows you to transfer unlimited assets to your U.S. spouse tax-free, but you would be using a portion of your $5.43 million exclusion to leave resources tax-free to anyone else. The maximum rate of the federal estate tax is a rather hefty 40 percent.
We practice law in the state of Connecticut. There are a number of states in the union that have state-level estate taxes, and Connecticut is among them. The Connecticut state estate tax exclusion is just $2 million, so you could be exposed to the state level estate tax even if you are exempt from the federal tax.
Estate Tax Efficiency Strategies
If you are exposed to estate taxes, there are things that you can do to ease the burden. Irrevocable trusts of various kinds are often used for estate tax efficiency purposes. One of them is the qualified personal residence trust. You could use this type of trust to transfer ownership of your home at a tax discount.
There are also charitable trusts that can be used to reduce your estate tax burden under certain circumstances. Generation-skipping trusts are utilized as well. With this type of trust, two generations can benefit from the resources, but there would be just one round of taxation.
Family limited partnerships can be used by some people who want to gain estate tax efficiency.
Grantor retained annuity trusts can also be useful. With this type of trust, you could potentially facilitate tax efficient asset transfers if you fund the trust with highly appreciable assets.
The optimal strategy will depend upon the case in question. If you discuss everything in detail with a licensed estate planning attorney, your lawyer will gain an understanding of your unique personal situation and make the appropriate recommendations.
Free Estate Tax Report
If you would like to learn more about estate taxes, download our special report. This report is being offered to our readers free of charge at the present time, and it will provide you with a great deal of valuable information.
To get your copy of the report, visit this page and follow the simple instructions: Estate Tax Report.
Schedule a Free Consultation
Our firm offers free consultations, and you can send us a message through this page to set up an appointment: Hartford CT Estate Planning Attorneys.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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