Estate taxes

Protect your assets from state and federal estate taxes by setting up and funding a tax-saving Credit Shelter Trust. Under current law, a Credit Shelter Trust will completely protect your assets from estate taxes for estates valued up to $2,000,000 for a married couple (if you die after 2011). Without this type of trust, beneficiaries who inherit an estate valued at $2,000,000 would be forced by IRS to pay $345,800 in federal estate taxes. Most couples don't realize that, without careful planning, the value of their estate includes their life insurance benefits. This means if the husband's or wife's estate is worth at least $1,000,000, including life insurance proceeds, the heirs will pay estate tax. Now the good news: a well-designed estate plan costing between $4,500 and $8,500 will save you $345,800 in federal estate taxes. Other ways you can avoid or reduce estate taxes include setting up (1) an irrevocable trust for your children, grandchildren or other heirs, (2) an irrevocable life insurance trust, (which detaches your life insurance benefits from your estate), (3) a charitable remainder trust, (4) second-to-die life insurance so you can pay estate taxes for pennies on the dollar, and (5) a Family Limited Partnership to reduce the taxable value of your property.

Income taxes

You can lower your income taxes by setting up a family limited partnership to own income-producing property. Then you can make gifts of limited partnership interests to the other limited partners, often your children or grandchildren. They then pay income tax at lower tax rates. A family limited partnership is an excellent tool to shift income to partners who pay taxes at lower rates. It's also an effective way to make gifts and still keep total control of all the property owned by the partnership.

Capital gains taxes

Protect your assets from capital gains taxes by owning your assets as community property, if you are a married couple. This can be done with a community property ownership agreement. On the death of either community property spouse, your entire estate gets a “double” step-up in basis for income tax purposes to the full value of appreciated property, thus avoiding ALL capital gains taxes. You get only a one-half step-up in basis if the property is owned in joint tenancy. Your attorney can set up this valuable tax-saving device at the time she creates your Family Trust. You can also place highly appreciated assets into a Charitable Remainder Trust and enjoy the income from those assets with no capital gains taxes for life.