Estate Planning Basics
When you hear the phrase "estate planning," the first thought that comes to mind may be taxes. But estate planning is about more than just reducing taxes. It's about ensuring your assets are distributed according to your wishes. That's why, even with the estate tax reduction (and eventual repeal in 2010) under the 2001 tax act, estate planning is still critical. In addition, estate taxes still pose a threat with respect to wealth available to transfer to the next generation. Remember, the "sunset" provision means that in 2011 the estate tax will return to where it stood before the 2001 tax act, unless Congress takes further action to change the law.
In addition, the act includes other provisions that increase the complexity of estate planning, such as repeal of the generation-skipping transfer (GST) tax (in 2010, with reinstatement in 2011); reduction in the top gift tax rate but no repeal of the gift tax; increases in GST and estate tax exemptions; and repeal of the step-up in income tax basis at death.
As a result, estate planning is more important than ever — without proper planning, estate taxes may still claim a large share of what you've spent a lifetime building.
This [article] will help you start preparing a plan to reduce your estate taxes. And if you already have a plan in place, it will show you how to make the adjustments necessary to take advantage of these changes and suggest strategies you currently may not be employing. We begin in this first [post] by offering you an overview of basic estate planning principles. Then we start discussing estate tax saving strategies.
Certainly this [article] is no replacement for professional financial, tax and legal advice. Because of the complexities and issues created by the 2001 tax act, Congress is likely to make further estate tax law changes that could affect the issues discussed here — or your estate plan. In addition, many states have now "decoupled" their death taxes from the federal estate tax, so that state taxes may be due upon your death even if no federal estate tax is due. Be sure to get professional advice before implementing any estate planning strategies.
SOURCE: Lisa Golshani