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76 lines
4.1 KiB
Plaintext
76 lines
4.1 KiB
Plaintext
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THE HIGH COSTS OF DYING
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It is universally recognized that everyone dies
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someday. Therefore, every individual is permitted to
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plan for an orderly transfer of his or her assets to a
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spouse, child(ren), and/or other loved ones. In
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addition, depending upon your success during life, upon
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death very substantial estate and inheritance taxes may
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be levied upon your estate. It is within the context
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of valid estate planning that ancillary lawsuit and
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asset protection is available. No court will ever deny
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a person the right to provided for their estate or to
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take advantage of the estate tax allowances available
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through trusts and other similar devices.
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Estate Tax Fundamentals
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Every dollar left in an estate is subject to a
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unified estate and gift tax. However, to eliminate the
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burden of taxation from "small" estates, congress has
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given every individual two loopholes: first, any
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individual may give any other person $10,000 per year
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estate/gift tax free and second, each person is given a
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lifetime estate/gift tax credit that is the rough
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equivalent of a $600,000 estate. In addition, a
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surviving spouse may inherit any amount from his/her
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spouse without paying tax until the death of the
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surviving spouse. To reduce the taxes ultimately
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attributable to one's estate, two techniques are
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usually used. Special types of trusts (the A-B and A-
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b/C trusts) are created that permit half of the estate
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to bypass the surviving spouse, thus creating a total
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exemption of about $1,200,000 from estate/gift taxes.
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For larger estates, the most effective technique is to
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give, over time, a large portion of the value of the
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estate to its intended heirs. A major objection to
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this technique is that it gives up control of the
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assets before the testator has given up the ghost.
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However, using this technique, a married couple can
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each give $10,000 per person per year, and using
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conduits such as other relative, this amount may be
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multiplied and the process accelerated.
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Avoiding Probate
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While you can't avoid dying you can avoid the high
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costs of probate. There has never been a will written
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that avoids probate. Probate costs include attorney
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and accountancy fees. To avoid probate many improperly
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use joint tenancy with the unwanted results described
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above. To properly avoid these costs you may utilize a
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fully funded revocable trust, also known as a "living
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trust." The costs of probate for an estate that
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exceeds the lifetime estate/gift tax credit may easily
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exceed $10,000. Moreover, probate means delays in
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transferring control of the assets and publicity
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regarding the details of the decedent's affairs. Using
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a living trust, you avoid these problems because you
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have pre-positioned your assets to permit a seamless
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transfer of control upon your death. While the Last
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Will and Testament will be probated it will essentially
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show no assets passing under its terms. For the twin
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reasons described above, costs and control, the use of
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the living trust is not only permissible but encouraged
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by the law and the courts.
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For married couples, forming two funded revocable
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living trusts is a good way to protect assets if one
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spouse is more vulnerable to claims than the other.
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Statutes in several states now provide that each spouse
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is entitled to hold his or her own property. For
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federal income tax purposes, the trust creators are
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treated as the trust property owners and no separate
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tax return for the trust need be filed.
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