Planning for Estate Taxes

When property is transferred from one person to another after death, the federal government will require estate tax to be paid. If the deceased individual's gross estate was worth more than $5 million, it is necessary to file a federal estate tax return. The gross estate includes: real estate, cash, life insurance, and stock and bonds. The executor of the estate is responsible for filing for estate taxes. As each state has different laws and regulations, it is important to speak with a legal professional about what is required in your state.

Part of estate planning it planning for these estate taxes. One of these tools is called unlimited marital deduction. It allows one spouse to legally transfer their entire estate to the other spouse without needing to pay any federal estate taxes. However, many people want to divide their property among their family and friends and not just their spouse.

If this is the case, you can choose to use a trust (known as an exemption trust). Whatever is in the trust is not part of the taxable portion of the deceased's estate. A life insurance trust is a common way of minimizing the taxes your beneficiaries will owe after your death.