First a few words about the federal estate tax.
The estate tax is a levy higher federal property (the sum of real estate and other property in possession) of a deceased person. Currently, the tax at a rate of 45% is available, ie, fewer exceptions, almost half of the assets to be taken by the government. Fortunately, there are several important exceptions to the property tax:
- Spouse Exemption - Transfer of ownership ofDiscount applies to the spouse, such as exemption from property tax
- Exemption Charity - similar bequeathed the property to a qualified charitable organization is exempt from taxes from the estate
- Standard Waiver - Federal law provides a base of $ 2 million exemption to all goods, in addition to the above two exceptions. This amount increases to $ 3.5 million in 2009.
Since it is clear that such information, the avoidance of inheritance taxsimple enough, right? Leave your entire estate to your husband or wife, and is able to easily and legally, the whole problem - or so it seems.
But what does the future hold? If you leave an estate of $ 4 million of your wife, what happens when your wife dies? Suppose, for example, that leaves his entire estate to your children - not an unusual decision. Unfortunately, the exemption only $ 2 million in this situation, which means that 45% ofremaining $ 2 million would be taken by the government instead of their children. How can I avoid this second round of tax?
The creation of a Bypass Trust
A bypass trust, therefore, developed a bypass trust "taxes on the property of the recipient. As such, the bypass trust are extremely useful for the intelligent planning of real estate. Let us return to the example above. We know that if you go have an estate of $ 4 million of your wife in the estate itselfPay taxes when his wife dies, and tries to pass the ownership to your children.
With a bypass trust, you and your wife can avoid estate taxes. That's how it works: instead of a simple step of keeping his 4 million dollars to get only 2 million U.S. dollars, and place the remaining 2 million dollars in a single pass trust. Under the exemptions, no tax is due on your property, trust falls below the standard exemption, while the remaining assets to go under the weddingExemption. The key, however, that if your wife dies, they can have the same $ 4 million estate to your children tax-free: the bypass trust is exempt from tax, and can leave the rest of the house for the exemption standard request.
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