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| FEDERAL ESTATE TAX When a person dies in possession of a taxable estate, the executor or trustee must file a Form 706 Federal Estate Tax Return and must pay any tax due. The estate may be valued either at the time of death ... or within six months of death. Every asset belonging to the deceased, whether it is green money or white money is subject to federal estate tax. Typical Tax Bites for the 1998 Calendar Year
There are four basic ways to avoid federal estate tax. They are: 1. The Spousal Rule: There is no tax on spousal transfers, whether in life, by gift, or at death, by legacy. 2. The Lifetime Exemption Rule: Each person has a lifetime exemption from taxation of $625,000.00. This exemption may be used during life ... or at death. But, not at both. See By-Pass Trust. 3. The Annual Exclusion Rule: Each donor can give $10,000.00 to as many recipients each year as he chooses. If he gives more than $10,000.00, he must file a Form 709, Federal Gift Tax Return, show the amount of the gift and, perhaps, pay tax. 4. The Charitable Rule: There is no federal gift or estate tax on gifts made to legitimate charitable organizations. An intelligent use of these four means of avoiding federal estate tax can save the family thousands of dollars. For example, by using the By-Pass Trust, a married couple can be sure that each of them uses his and her lifetime exemption ... and can result in a tax savings of as much as $246,250.00. Annual gifts, made to people or trusts, can substantially reduce the taxable estate and can save as much as $5,500.00 each time a gift of $10,000.00 is made. Charitable gifts can assure you that your estate is not unduly taxed. To include charitable gifts in your estate plan, you may want to tell your attorney to make "The Foundation" a beneficiary of your will or trust.
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