Understand why you should not own your own life insurance and how the voluntary nature of estate taxes and capital gains taxes can be controlled.
- Avoid the 12 worst estate planning errors
- Learn how the IRS can pay for your life insurance needs
- Create a family fund that will be exempt from estate taxes forever
- How the wealthiest U.S.families create and preserve their wealth
- Reposition growth assets to income assets without income tax penalties
Will Rogers on Death and Taxes
'The difference between death and taxes is death doesn't get worse every time Congress meets.'
Will Rogers on a Balanced Budget
'Alexander Hamilton started the U.S. Treasury with nothing -- and that was the closest our country has ever been to being even.'
Defuse Your Ticking Tax Time Bomb
Could your estate withstand a 5,500 point drop in the Dow? It's going to happen at death. Instead, create a perpetual private family bank to fund activities forever sheltered from estate taxes.
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FOR YOUR OWN CRT SCENARIO or try your own at Donor Direct. Please note -- there's much more to estate and charitable planning than simply running software calculations, but it does give you a chance to see how the calculations affect some of the design considerations. This is not "do it yourself brain surgery". Is a CRUT superior to a CRAT? Which type of CRUT is best used with which assets? Although it may be counter-intuitive, sometimes a lower payout CRUT makes more sense and pays more total income to beneficiaries. Why? When to use a CLUT vs. CLAT and the traps in each lead trust. Which tools work best in which planning scenarios? Check with our office for solutions to this alphabet soup of planned giving tools.
'Over and over again, the courts have said there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich and poor, and all do right, for nobody owes any duty to pay more tax than the law demands. Taxes are enforced exactions, not voluntary contributions.'
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New Estate Tax Schedule
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| Gift Tax Exemption goes to $1,000,000, but no longer linked or "unified" with estate tax | Estate and Generation Skipping Tax (GST) rates and scheduled implementation linked | Sunset provision may complicate planning |
| Year | Exclusion | Top Rates |
| 2002 | $1,000,000 | 50% |
| 2003 | $1,000,000 | 49% |
| 2004 | $1,500,000 | 48% |
| 2005 | $1,500,000 | 47% |
| 2006 | $2,000,000 | 46% |
| 2007 | $2,000,000 | 45% |
| 2008 | $2,000,000 | 45% |
| 2009 | $3,500,000 | 45% |
| 2010 | N/A | Repealed |
| "Sunset" provision kicks in 1/1/2011 | $1,000,000 | 55% |
| Final bill (291 pages) HR 1836 | Plain text (258 pages) HR 1836 | JCT (15 pages) Summary |
| No step up in basis for all inherited assets, new and complicated rules will come into place. Within the unlimited marital deduction, any step-up is soon to be limited to $3,000,000 passing from decedent to spouse. | Allows a new basis for $1,300,000 of property inherited from the decedent, but no step-down or step up beyond the $1.3 million. NY Times Article June 14 Lawyers and Accountants Expect Windfall From Estate Tax Repeal | CCH Tax Briefing changes presented to planners with EGTRRA 2001 (HR 1836 is now Public Law 107-16) and a Deloitte & Touche Review and an Aspen Publishing Review and the charitable planning implications from Caplin Drysdale of EGTRRA 2001 |
| State death tax credit will be reduced by 25% in 2002, 50% in 2003, 75% in 2004, repealed in 2005, and replaced instead with a deduction for state death taxes paid | The gift tax is not repealed and is no longer linked to the estate tax. The gift tax exclusion amount will remain at $1,000,000 from 2002 onward. | No QFOBI (section 2057) after 2004 |
| IRS Withholding Calculator after EGTRRA 2001 | Tax Reform Article from the ABA-PTL | Extensive Estate Planning, Elder Law & Tax Links |
| Estate Tax Reform Facts (as presented by this lobbying group) | Reforming the Estate Tax | Estate Tax and Revenue |
Vaughn W. HenryHenry & Associates
Gift and Estate Planning Resources
22 Hyde Park Place
Springfield, IL 62703 USA
Phone: (217) 529-1958 Fax: (217) 529-1959
E-mail: VWHenry@aol.comLast Updated: June 10, 2008
Gift & Estate Planning Resources © 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008
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How Estate Tax "Relief" Changed With TRA 1997
Now Superceded by EGTRRA 2001| Year of death | Unified credit | Deduction equivalent |
| 1982 | $62,800 | $225,000 |
| 1983 | $79,300 | $275,000 |
| 1984 | $96,300 | $325,000 |
| 1985 | $121,800 | $400,000 |
| 1986 | $155,800 | $500,000 |
| 1987 | $192,800 | $600,000 |
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Estate Tax Changes Phase In Each Year |
Applicable Federal Exclusion Amount |
Effect of Inflation CPI Increase from 1987 = 100% to 1997 = 143.2% 2006 = 186.8% if the annual rate is projected at 3%. |
Exemption Equivalent (Current Value of Assets That Transfer Free of Gift/Estate Tax) |
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1987 through 1996 |
$192,800 |
$600,000 down to $431,635 |
$600,000 |
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1997 |
$192,800 |
$419,063 |
$600,000 |
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1998 |
$202,050 |
$423,810 |
$625,000 |
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1999 |
$211,300 |
$427,925 |
$650,000 |
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2000 |
$220,550 |
$431,440 |
$675,000 |
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2001 |
$220,550 |
$418,874 |
$675,000 |
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2002 |
$229,800 |
$421,736 |
$700,000 |
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2003 |
$229,800 |
$409,452 |
$700,000 |
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2004 |
$287,300 |
$482,711 |
$850,000 |
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2005 |
$326,300 |
$523,786 |
$950,000 |
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2006 and thereafter |
$345,800 |
$535,295 |
$1,000,000 |
Inflation's Impact on Your "Unified Credit"
The older estate plans occasionally refer to the original $600,000 exemption that went into effect in 1987, and with a decade of inflation, it's now worth much less. Recent changes in estate tax law don't even offset inflation's effect on the exemption from 1987 levels. Future CPI increases are assumed to average 3% per year. Since the newest change to the Tax Code makes no reference to "Unified Credit", you may want to have your legal advisors check to see if your existing estate planning documents need to be updated.
Need a workshop or private family seminar on estate planning and family wealth preservation strategies? Contact us for an estate planning conference.
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© Henry & Associates 2002, 2003, 2004, 2005, 2006, 2007, 2008
CONTACT US FOR A FREE
PRELIMINARY CASE
STUDY FOR YOUR OWN PLANNING SCENARIO or try your own at Donor Direct. Please note -- there's more to estate and charitable planning than simply running calculations, but it does give you a chance to see how the calculations affect some of the design considerations. Which tools work best in which planning scenarios? Check with our office for solutions.
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