The Green Law Group, PLLC

What Is Estate Planning?

Estate planning is a process to consider alternatives for, to think through, and to set up legally effective arrangements that would meet your specific wishes if something happens to you or those you care about. Good estate planning is more than just a simple Will. Estate planning also typically minimizes potential taxes and fees, and sets up contingency planning to make sure your wishes regarding health care treatment are followed. On the financial side, a good estate plan coordinates what would happen with your home, your investments, your business, your life insurance, your employee benefits (such as a 401K plan), and other property in the event you became disabled or if you die. On the personal side, a good estate plan includes directions to carry out your wishes regarding health care matters, so that if you ever are unable to give the directions yourself, someone you select would do that for you, and know when you would want them to authorize heroic measures and when you would prefer they pull the plug.

What Is An Estate Tax?

The Estate Tax is a tax on the value of your property transfered to your hiers upon your death.  The federal government allows every person to give away, either through lifetime gifts or upon death a certain maximum dollar value of property without being taxed. This is known as your Lifetime Exemption.  The maximum amount of the lifetime exemption does change from time to time as determined by Congress.  Any assets you own at your death that amount to more than lifetime exemption in place are then taxed at a progressive Estate Tax.

Certain transfers are not counted toward the lifetime exemption, such as a gifts of up to certain amounts made by you to any person per year, or gifts given to pay for tuition or medical expenses.

The Internal Revenue Code also allows married persons to gift, or leave at death, certain property to their spouse which may qualify for marital deductions, which may also be exempt from tax. 

The estate tax laws can be complex and also vary from year to year in terms of the amount of available deductions or exemptions.  Therefore, it is highly recommended that individuals or couples seek the advice of a qualified estate planning attorney to discuss which estate planning tools would best suit their particular situation.  The attorney can recommend ways you can not only achieve your goals for your property upon death, but also help you to minimize estate tax liability to the fullest extent allowed under the applicable laws. 

How Can I Reduce My Estate Tax Upon My Death?

Federal Estate Taxes are only charged against Estates with net values in excess of the amount set by the law in place at the time of the person's death.  The values change from time to time.  For example, the amount that exempt from Federal Estate Tax  in 2004-2005 was $1.5 million ($3 million if married); $2 million in 2006 through 2008 ($4 million if married); $3.5 million in 2009 ($7 million if married) and then in 2010 there is scheduled not to be any federal estate tax. 

If you think your Estate will exceed whatever the maximum net estate value is at the time of your death, then the assistance of a qualified estate planning attorney is highly recommended.  There may be ways, for example, to reduce the value of your estate at death by making gifts throughout your lifetime, transferring assets to a spouse and taking advantage of any marital deductions, and other wealth transfer mechanisms.  These are often complicated matters requiring the assistance of legal counsel.