Gift and Estate Tax Planning

After over a decade of uncertainty and confusion in the gift and estate tax laws Congress has finally made some decisions that are (purportedly) here to stay. The federal combined (or “unified”) gift and estate tax exemption is $5.49 million for 2017, with the only anticipated increases to be linked to inflation. Assets that are gifted or bequeathed in excess of this $5.49 million exemption could be taxed at a rate of as high as 40%.

Although the federal exemption is fairly generous, Massachusetts residents (or non-residents with property located in Massachusetts) also have a state estate tax to reckon with if assets exceed $1 million. Although the rates are far lower in Massachusetts than the federal rate, this can still be a significant tax that might be reduced or even eliminated in some circumstance with proper planning. Just some of the planning techniques for reducing or eliminating these taxes include:

  • Credit shelter planning to maximize the benefit of the estate tax exemption
  • Marital deduction planning to further reduce and defer estate taxes
  • Lifetime gifting techniques to move assets with minimal relative tax
  • Life insurance planning to provide liquidity and/or to replace wealth lost to taxes Life Insurance Tax Trap
  • Generation-skipping trusts to preserve more for lower generations GST Taxes
  • Discount Entities in Estate Planning