Marital Trusts - A trust which pays all of its assets to the surviving spouse. A marital trust can postpone the assessment of estate taxes but may not completely shelter your estate from taxes. This is because whatever is left over when the surviving spouse dies gets included in the surviving spouse's gross estate. If the estate is large enough, estate taxes will then be assessed.
Unlimited Marital Deduction - Federal estate tax law allows you to distribute your entire estate to your surviving spouse, tax-free, provided the surviving spouse is a U.S. citizen.
Annual Gift Tax Exclusion - Each year an individual is allowed to gift as much as $10,000*, married couples can gift up to $20,000*. This enables you to reduce the value of your estate and transfer it in a controlled manner over time.
Charitable Remainder Trusts (CRT) - A CRT can convert your highly appreciated assets into a lifetime income source without generating capital gains or estate taxes. Additionally, one or more charities you select will benefit from your donation. By establishing a Charitable Remainder Trust you can: create a source of lifetime income to supplement your retirement; avoid capital gains and estate taxation; reduce current income taxes via a charitable deduction; make a significant future charitable gift; potentially increase inheritance to your family and heirs.
QTIP Trusts - This type of trust is similar to other marital trusts in that it allows you to provide an ongoing income for the surviving spouse. However, it is different from other marital trusts because it allows the grantor to designate a beneficiary for the remaining assets (if there are any), in the event of the surviving spouse's death. However, at that time, the remaining estate will be subject to estate taxes.
Credit Shelter Trusts - This type of trust can be established to ensure that the Applicable Exclusion Amounts ($1,000,000 in 2002) of both spouses are applied to the estate. For example, the Applicable Exclusion Amount is applied to the estate upon the first spouse's death effectively reducing tax exposure. Then, upon the surviving spouse's death, his/her remaining Applicable Exclusion Amount is applied to the remaining estate.
The concepts contained herein are not intended to serve as advice and may have legal, tax and accounting implications. Consult your Attorney and CPA for advice.
* Beginning in 1999, the annual gift tax exclusion will be indexed for inflation. For the year 2002, the gift tax exclusion is $11,000 per individual; couples can gift up to $22,000.