Have you reviewed your estate plan lately?
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By Tim Mayclin  October 8, 2009 05:35 pm

As the rules currently stand, up to $3.5 million of an estate’s value is exempt from federal estate tax for deaths occurring in 2009. In 2010, the estate tax is scheduled to disappear completely, but just for one year. In 2011, the tax will return with a lower $1 million exemption.
Congress has made it clear that they will not let the estate tax expire even for one year, but the details of what the new exemption amount and tax rates will be have yet to be worked out. This makes planning more difficult and more important. Since the estate tax starts at 45 percent, it can be very costly to have an outdated or inaccurate estate plan.
In the meantime, a bit of planning can put you in a tax-saving position no matter what Congress finally decides to do.
Some things to consider:
• Many married couples have wills that leave everything to the surviving spouse. This can work well for some people. For others it can mean sizable and unnecessary estate taxes when the second spouse dies. Some simple planning moves can often shield the estate of the second spouse to die from taxation.
• Using the annual gift tax exclusion of $13,000 per recipient can reduce the size of your estate. If your spouse joins in the giving, you can transfer up to $26,000 to any number of recipients during the year.
• Generally, if you own a life insurance policy, the proceeds are subject to tax as part of your estate. Establishing an irrevocable life insurance trust to own the policy can shelter the proceeds from estate tax.
• Update your will and other estate planning documents, and review beneficiary designations on IRAs, 401(k)’s, and life insurance policies.
• If it has been more than five years since you have had your will or trust reviewed, it is a good idea to do so now. Things in your life have probably changed and the law may have changed.
The larger your estate, the more essential planning will be. A good estate attorney is essential to help you determine what is best for your personal situation. It is important to review your estate before it is too late. If you do not have a will or trust when you die, the state will decide what to do with your assets. You probably can make a better decision than the state about where your assets should go.

Tim Mayclin is a Certified Public Accountant with over 25 years of broad-based business experience. He can be contacted through the California Business Development Center at 664-6464 or consultants@californiabusinessdevelopment.com.

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