Estate Planning

Eight Estate-Planning Strategies for You

Estate planning is very complex and it is important to evaluate your current estate plan in light of  potential  changes in estate tax laws. Be sure to work with your financial advisor, tax professional and an attorney who specializes in the area of estate taxes and trust when evaluating your own personal situation. Don't delay in setting a new estate plan into motion. Definitions available at

1. A Will

A valid will stipulates to whom you want your assets distributed.
Without a will, the laws of the state where you reside will determine for

2. A living will, medical power of attorney and financial power of attorney.

A living will stipulates what life-saving medical procedures you want or don't want in the event you are physically or mentally incapaCitated. A medical power of attorney apPOints a person the power to make medical decisions on your behalf, while a financial power of attorney states who can make financial decisions on your behalf.

3. The annual gift-tax exclusion

One of the most basic and inexpensive strategies for saving estate taxes, the gift-tax exclusion allows you to give away, tax free, $13,500 a year (indexed for inflation) to each beneficiary you choose. Thus, you and your spouse could jointly give away $27,000 annually to each of your children, grandchildren or anyone else without incurring a gift tax.

4. Medical and Tuition payments

A person can make unlimited gift-tax-free payments for another’s tuition or medical bills without it counting against the payer’s lifetime gift-tax exclusion, as long as the payments are made directly to the educational or medical institution. A grandparent, for example, could pay a $20,000 annual tuition bill to a college for a grandchild gift-tax free, and then give directly to the child up to another $11,000 a year for non-tuition college expenses, taking advantage of the annual gift-tax exclusion.

5. Lifetime giving

Assuming you have sufficient funds to live on, lifetime gifting often can better reduce your estate tax liability than waiting until death to pass on your estate. One advantage of lifetime gifting is that you can remove appreciating assets, such as common stock, from your estate. The second advantage is that if your gift is taxable (you can give away up to $4 million gift-tax free during your lifetime), the
money you use to pay the gift tax is also removed from your estate, thus reducing any future estate taxes.

7. Irrevocable life insurance trust

The proceeds of a life insurance policy held in your estate, perhaps used to pay for estate taxes, is subject to estate tax. But if an irrevocable life insurance trust owns the policy, the proceeds will not be included in your estate. You may donate annually to the trust an amount equal to the premiums to pay for the policy. For these donations to qualify for the annual gift-tax exclusion, you must use a complicated strategy called Crummey letters. Contact your tax professional for more information.

8. Charitable remainder trust

The donor transfers property to the CRT, receiving an immediate income-tax deduction and avoiding any capital gains taxes on donated appreciated property. In return, the donor receives an income stream generated by the trust assets either for a specified time or for life. At the end of that period, the charitable organization inherits the trust assets.

First WallStreet Financial Advisors does not provide tax or legal advice. Please consult with your own tax and legal advisors before taking any action that would have tax consequences.