Perhaps the most important piece of information that you must ascertain when you begin to engage in the process of estate planning is where you stand in relationship to the estate tax exclusion. At the present time this exclusion stands at $5 million, and this means that only the portion of your estate that exceeds this amount is subject to the estate tax. So if your estate is worth $5 million or less at the present time the estate tax is not an issue for you.
However, if no new laws are passed in the meantime the estate tax exclusion is scheduled to be reduced to $1 million at the beginning of 2013, and this is something to keep in mind. The constant changes to the laws can be hard to keep up with if you are not specifically in the business of estate planning, and this is one of the reasons why it is a good idea to retain the services of an estate planning lawyer and recognize the fact that ongoing adjustments are likely to be necessary.
Many people who do need to seek estate tax efficiency also have the desire to give something back to the community as a whole through charitable giving. There are some estate planning instruments that can help you achieve this dual objective, and one of them is the charitable remainder unitrust or CRUT.
The way it works is that you fund the trust and you name a non-charitable beneficiary who must receive annual annuity payments from the trust equaling between 5% and 50% of its total current value. Most people will act as their own beneficiary. You also name a charitable beneficiary who will assume ownership of the remainder of the trust after it expires or upon the death of the grantor. This remainder must be at least 10% of the original value of the trust.
When you create the trust you are removing those assets from your estate for estate tax purposes and you also get a charitable deduction, the amount of which is derived from the value of the remainder interest. If you were to fund the trust with appreciated securities there are also capital gains advantages. To find out more, simply arrange for a consultation with an experienced estate planning attorney.