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Estate Taxes

Depending on how much you own, your estate may have to pay estate taxes before your assets can be fully distributed. Estate taxes are different from, and in addition to, probate expenses (which can be avoided with a revocable living trust) and final income taxes (on income you receive in the year you die). Some states also have their own death inheritance taxes.

Federal estate taxes are expensive. And they must be paid in cash, usually within nine months after you die. Since few estates have this kind of cash, assets often have to be liquidated. But estate taxes can be substantially reduced or even eliminated–if you plan ahead.

Who Pays Estate Taxes?

Your estate will have to pay estate taxes if its net value when you die is more than the “exempt” amount set by Congress at that time. Here is the current schedule:

Year of Death		Exemption
2009		$3.5 Million
2010		N/A Repealed
2011 & after		$1 Million

Estate Tax Strategies

Estate Asset Strategies

Assets you give away keep your cost basis (what you paid), so the recipients may have to pay capital gains tax when they sell. That’s a lot less than estate taxes (45-48%) if you keep the assets until you die. If your net estate (assets less debts) is more than the amount exempt from estate taxes for that year, estate taxes must be paid. Some of the most commonly-used strategies to remove assets from estates are explained below.

Note all of these are all irrevocable, so you can't change your mind later.

Tax-Free Gifts

This is easy and it doesn’t cost anything. Each year, you can give up to $12,000 ($24,000 if married) to as many people as you wish. So if you give $ 12,000 to each of your two children and five grandchildren, you will reduce your estate by $84,000 (7 x $12,000) a year– $168,000 if your spouse joins you. (This amount is now tied to inflation and may increase every few years.)

Irrevocable Life Insurance Trust (ILIT)

An easy way to remove life insurance from your estate is to make an ILIT the owner of the policies. As long as you live three years after the transfer of an existing policy, the death benefits will not be included in your estate. Usually the ILIT is also beneficiary of the policy, giving you the option of keeping the proceeds in the trust for years, with periodic distributions to your spouse, children and grandchildren. Proceeds kept in the trust are protected from irresponsible spending and creditors, even ex-spouses.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC, Insurance products offered through LPL Financial or its licensed affiliates. Citizens Business Bank and CitizensTrust Investment Services are not registered broker/dealers and are not affiliated with LPL Financial.

The LPL Financial registered representative associated with this may only discuss and/or transact securities business with residents of the following states: CA

Investment Products
Not FDIC Insured - No Bank Guarantee - May Lose Value

Please Note:
Any amounts invested pursuant to repurchase agreements are not deposits of the bank, are not insured by the Federal Deposit Insurance Corporation (FDIC), are not themselves guaranteed in any way by the United States or any of its agencies (even though the securities purchased by means of a repurchase agreement may be), are not a money market certificate but are subject to investment risks, including possible loss of principal invested.