Taxes and Estate Planning



In 2001, Congress passed a law phasing out estate taxes. However, the law expires in 2010 and has not been updated as of January 1, 2006. Thus, under the current scenario, if you were to die in 2011 and your estate is worth over $1 million, your estate could be taxed at a rate as high as 55%.

Because of this uncertainty, many advisors continue to recommend the use of trusts, life insurance and other potential tax-minimizing tools for any individual with an estate worth over $1 million.

The importance of consulting an estate planning professional becomes even more evident given other complex provisions of estate tax laws. For example, gift tax exemptions were increased in 2002. However, previous tax planning strategies of making lifetime gifts to children need to be re-evaluated, since it may no longer make sense to pay gift taxes on a transfer that could otherwise be made tax-free upon death.

Other hiccups in the new law could result in payment of more taxes. For example, state estate tax credits are being phased out, which will effectively raise the state estate tax rate. Another change that could cost your heirs involves the way the basis amount is calculated and the extent to which business owners can pass on the business to their heirs.

Why have an estate plan?
While the tax laws are complicated, the basic purposes of having an estate plan is to prepare for the future. Even if your estate is not large enough to trigger estate taxes, estate planning, including having a current will and adequate life insurance, benefits you and your heirs in numerous ways:

• enables you to give assets to charity or heirs while potentially generating current income and/or tax deductions for yourself

• offers financial management and orderly administration of your assets in the event of your incapacitation

• helps provide for dependent children, parents or any heir incapable of caring for themselves

• ensures that your assets are distributed among your beneficiaries according to your wishes

• for business owners, helps ensure a smooth succession of your business and helps avoid forced liquidation

• helps provide financial security for your loved ones.

Thus, no matter how big your estate, you should consult an estate planning specialist if you do not have a current estate plan. If you do have such a plan, you should talk to your advisor to make sure that it reflects your wishes and situation in light of current estate tax law.

AXA Advisors, LLC does not provide legal or tax advice. Please consult your tax or legal advisor regarding your individual situation.

Frances Savage offers securities and investment advisory services through AXA Advisors, LLC (member NASD, SIPC) at 1633 Broadway, 3rd floor, New York, NY 10019 and offers annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC and its subsidiaries. For questions or concerns, please call me at 718-601-0751. GE-35329 ((03/06) (exp.03/08)


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