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Did You KnowThat your $250,000 in life insurance coverage could be hit for $94,500 in Federal estate tax? If your Unified Federal Gift and Estate Tax Credit (in effect, exempting $1,000,000) and estate tax deductions, are off-set by other assets - say for example, a residence worth $500,000, IRA worth $225,000, $200,000 in other retirement plan assets and another $75,000 in investments, bank accounts, cars and other personal property - then life insurance on your life, and owned by you, (or any other additional asset) will be taxed at a minimum rate of 37%. (here, 37.8%) An irrevocable life insurance trust may well save that tax. Current law provides for the Unified Credit (the amount of estate and gift property you can give away during your lifetime without paying federal estate taxes) to increase as follows: 2004 $1,500,000 2005 $1,500,000 2006 $2,000,000 2007 $2,000,000 2008 $2,000,000 2009 $3,500,000 In 2010, the current law provides for no Federal Estate Tax. Unless Congress either extends the current law or passes some new form of estate tax legislation, beginning in 2011, the Unified Credit returns to its pre-2001 level of $1,000,000. That persons domiciled in Maryland, and having a "second family", e.g., through a second marriage, are able to save avoid Maryland inheritance tax by the relatively inexpensive use of legal adoption? If one marries a spouse who has a child by a prior union, and chooses to leave a substantial sum, say $50,000 to that child, it may be wise to adopt legally. An adopted daughter, for example, would pay no inheritance tax, while a step-daughter would pay $5,000 (10%). That you can "control" which of you, wife or husband, is held to survive the other in the case of a "common disaster"? Which spouse dies first in such cases can have far-reaching and major effects, both tax-wise, and otherwise. Proper testamentary language, intelligently chosen, may be extremely important, and it will be controlling in the absence of clear, persuasive evidence to the contrary, AND, if your estate planning documents do not deal with it, you will, in effect, adopt what someone else provided in a state statute. DO YOU KNOW WHO will be responsible and care for your minor children and their assets in the event of an accidental or other untimely death, leaving no parent surviving? This may be the most significant reason why some people should have a Will or Trust, even if their estates are not large enough to "have enough to worry about." You have probably heard of cases of family feuds over who gets the silver service, or the grandfather's clock, etc., when parent dies. But how would you like to have guardianship of your child or children be the center of such an unpleasant scenario? It happens. People have had to cope with just that problem. The guardian you name in your Will is very unlikely to be faced with that kind of trouble. If no one is named as the guardian of your minor children, you have no say over who will raise and care for them. Proper planning will help to place them in the proper hands. Copyright 1996 - 2006, McChesney & Dale, P.C.
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