NFIB

Trust Me?
02/ 03/ 2003

by Carol Wissmann

You've built your business and managed to multiply and maintain it. After your death, you'd like as much of your wealth to go to whomever you choose.

Plan now. The 2001 Tax Act currently excludes the first $1 million of your estate from inheritance tax. Above $1 million , the estate tax rate is steep--from 41 to 50 percent. The exclusion amount and tax rate will change most years from now until 2010. However in 2011, the tax law reverts to the law in effect in 2001, unless Congress repeals it permanently.

Don Skanchy, of Investors Financial and Estate Planning Services, LLC in Sea Tac, Wash., suggests setting up a revocable living trust. "Business owners who are married often own the company in joint tenancy with right of survivorship," Skanchy says. "Under normal conditions, such as a will, when one spouse dies, the assets are passed to the surviving spouse. When that spouse dies, the most that can be sheltered today is 1 million."

But with a living trust, if set up properly, a $1,000,000 tax credit can be attributed to each spouse. By 2009, this will increase to $3.5 million per spouse, with a total of $7,000,000 sheltered. Plus a living trust, unlike a will, transfers assets without probate proceedings.

Contact an estate planning attorney to help you write the trust.

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This article originally appeared in the February/March 2003 issue of MyBusiness magazine.

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