Through a lifetime or working, saving, and investing you likely have a respectable estate you wish to pass down. Incorporating tax avoidance strategies into your estate plan lets you do this without losing a sizeable portion of your estate to gift and estate taxes.

8. All assets must be identified and valued as
part of the probate process
The gift and estate tax has been as high as
55 percent in recent years
American Taxpayer Relief Act of 2013, or
ATRA, permanently set the tax rate at a
maximum of 40 percent
Careful estate planning can decrease, or
eliminate, exposure to gift and estate taxes

15. John and Anna are married
John recently died
John left behind an estate valued at $4 million
– less than his lifetime exemption limit

16. John made gifts during his lifetime totaling
$2.25 million – bringing his total gifts to $6.25
million
$1 million of John’s estate is subject to federal
gift and estate taxes
John’s estate would owe $400,000 in taxes ($1
million x 0.40 = $400,000)

19. John can leave his $44 million estate to Anna and avoid
gift and estate taxes
John has then only used $2.25 million of his $5.25 million
lifetime exemption as a result of gifts he made during his
lifetime
This could over-fund Anna’s estate

20. Assume that Anna also has $4 million in separate assets
– she now has an estate valued at $8 million -- $2.75
above her lifetime exemption limit
Even if Anna made no additional gifts during her
lifetime, her estate would now owe $1.1 million in gift
and estate taxes when she dies ($2.75 million x 0.40 =
$1.1 million)

24. Anna may combine the unused portion of John’s lifetime
exemption with her own exemption for a total exemption of
$8.25 million ($3 million + $5.25 million).
If Anna’s estate does not grow she can avoid gift and estate
taxes because her estate’s value of $8 million is less than
her total exemption of $8.25 million

30. Allows a taxpayer to make as many gifts as he/she
wishes valued at up to $14,000 each year to as many
recipients as he/she wishes without incurring gift and
estate taxes
Gifts made using the annual exclusion do NOT count
toward the lifetime exemption limit
Married couple may use “gift-splitting” to double value
of a gift

31. Anna could use it after John’s death
Anna and John could have used it prior to his death
If Ann and John have 4 children and they used the
“gift-splitting” option to gift to all four children for ten
years they could have transferred $1.12 million taxfree. ($28,000 x 4 x 10 = $1.12 million)