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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2010   N/A Repealed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 Tax Strategies

How can I reduce or eliminate my estate taxes?

In the simplest terms, there are three ways:

  1. If you are married, use both estate tax exemptions.
  2. Remove assets from your estate before you die.
  3. Fund Estate Tax Liability to replace assets given to charity and/or pay any remaining estate taxes.

1. Use Both Exemptions

If your spouse is a U.S. citizen, you can leave him or her an unlimited amount when you die with no estate tax. But this can be a tax trap, because it wastes an exemption. Tax planning in a living trust lets you and your spouse use both your estate tax exemptions and transfer assets to your loved ones.

2. Remove Assets From Your EstateSee Estate Asset Strategies

A great way to reduce estate taxes is to reduce the size of your estate before you die. So, spend some and enjoy it! Also, you probably know whom you want to have your assets after you die. Appreciating assets are usually best to give, because any future appreciation will also be out of your estate.

3. Fund Estate Tax Liability

Depending on your age and health, buying life insurance can be an inexpensive way to replace an asset given to charity and/or to pay any remaining estate taxes. The three-year rule mentioned earlier does not apply to new policies. But you should not be the owner of the policy– that would increase your taxable estate and estate taxes. To keep the death benefits out of your estate, set up an ILIT and have the trustee purchase the policy for you.


Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA, Member 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

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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.
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