Many people are surprised by how much tax their estate could owe to both state and federal governments. At our law firm Berman & Associates, our lawyers help families manage future estate tax exposure through careful asset management, protection of marital exemptions and strategically selected trust instruments that address their practical needs.

Living Trusts vs. Irrevocable Trusts in Tax Planning

Transferring assets into a living trust will keep certain assets outside Pennsylvania’s probate process, but it will not provide an effective shield against estate taxes. The IRS effectively ignores living trusts because they hold revocable assets. Only irrevocable trusts that place assets out of the settlor’s reach can effectively shelter your estate from tax exposure.

Here are some options to consider:

  • In 2012, Congress reformed the estate tax so that the first $5 million of a person’s estate is exempt from estate tax. Married couples can easily combine their exemptions by choosing spousal exemption portability on an estate tax return after the death of the first spouse to effectively double the exemption. The exemption amounts are also indexed for inflation so that they increase every year. The law also makes it fairly easy for the surviving spouse of a married couple to transfer the unused part of the deceased spouse’s estate tax exemption, which potentially doubles a person’s federal estate tax exemption. These exemptions make it possible for most people to avoid the federal estate tax.
  • For estates that are larger than the federal exemption amount, other approaches for managing estate tax exposure are available. They might involve the use of irrevocable life insurance trusts, charitable remainder trusts, or, for families who anticipate that their property will increase in value, a qualified personal residential trust. Our advice concerning estate planning options is always tailored to the specific circumstances and objectives of our clients.

People of Modest Means Can Benefit From Estate Tax Planning

Life insurance proceeds or appreciation of property values can trigger federal estate tax liabilities for families who would never consider themselves wealthy. For many middle-class families, the Pennsylvania inheritance tax can take a large bite out of an estate thereby making estate tax planning a worthwhile endeavor.

Contact Us Now for an Initial Consultation About Estate Tax Planning

Our attorneys at Berman & Associates are here to evaluate your potential tax liabilities and develop a personalized plan for protecting as much of your estate as possible. Please schedule an initial consultation by contacting us.