Tax Planning & Advanced Estate Planning Techniques

Federal & State Estate Tax

Federal and (in most cases) state law imposes taxes on any assets that are transferred upon your death or by gift during your lifetime. These taxes, known as the “estate tax” and “gift tax,” respectively, are payable by the estate or by the person making the gift as the case may be. While certain amounts of assets may be transferred by gifts or at death without incurring these taxes, once these thresholds are exceeded, gifts and estates are taxed at high rates, up to or even more than 50% (when federal and state taxes are combined). If you fail to plan for estate and gift taxes, you and your estate may be subject to unnecessary taxes.

The federal estate tax applies to assets owned by you or otherwise transferred upon your death, known as your “taxable estate.” Many states have their own estate taxes, which must also be taken into account. The taxable estate includes assets such as your home, personal property, bank accounts, and investments, as well as retirement plans (e.g., 401(k) and IRAs) and life insurance benefits payable upon your death. Thus, your taxable estate may include more than most people would think of as their wealth or estate. Under current law, each person is entitled to a lifetime “exemption equivalent amount” which offsets the tax up to a specific limited value of the property in your taxable estate. Again, careful planning and execution is important.

For high net worth clients, taxes can take a huge bite out of the wealth that one has worked a lifetime to accumulate. Dominion’s estate planning attorney works with clients to establish estate plans and otherwise structure their affairs to minimize federal and state estate taxes. Various techniques that can be used to accomplish a client’s tax and other objectives, including:

  • Bypass (aka Credit Shelter) Trust
  • Irrevocable Life Insurance Trust
  • Charitable Remainder Trust / Charitable Lead Trust
  • Family Limited Partnership / Limited Liability Company
  • Private (Family) Foundation

Discuss your estate tax situation with an experienced estate planner.