One of the things that must be determined when you are engaged in the process of estate planning is whether or not your estate is going to be exposed to the estate tax. Believe it or not, this is something that is much easier said than done because the estate tax exclusion moves around a lot, sometimes without much advance warning. At the present time the estate tax exclusion is $5 million and the maximum rate of the tax is 35%. So if your estate is worth less than $5 million you are not exposed to the tax at this time.
However, the new tax relief bill that went into effect at the beginning of this year (formally referred to as the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010) is going to expire at the end of next year unless some new legislation is passed in the meantime. If it does sunset without any tax relief measure to replace it, the rate of the estate tax will be 55% and the exclusion will go all the way down to $1 million. As a result anyone who has an estate that is valued at more than $1 million is indeed exposed to the estate tax as of the beginning of 2013 as the laws stands today.
What can you do to gain estate tax efficiency? There are many different things that one can do, and the best way to explore them all is to arrange for a consultation with an experienced estate planning attorney. Exactly what combination of instruments should be utilized is going to vary depending on the exact anatomy of your assets and the specific nature of your wishes. Your attorney will evaluate your holdings, listen as you explain your intentions, and help you devise a plan that maximizes your assets while allowing for a smooth and efficient transfer to your loved ones after your death.