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PERSONAL FINANCE

Plan Now, Pay Less Later

Estate planning tax strategies.
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If you have postponed or dismissed the need for estate planning, consider the tax consequences for unsheltered bequests. (Remember, of course, that there's no tax assessment when estates pass between spouses.)

Taxable estate Federal gift-and-estate-tax bill

Less than $600,000 $0

" $750,000 $55,000

" $1,000,000 $153,000

" $1,250,000 $255,500

" $1,500,000 $363,000

" $2,000,000 $588,000

" $2,500,000 $833,000

" $3,000,000 $1,098,000

" $10,000,000 $5,003,000

Source: Miller, Cooper & Co.

It's wise to consult an accountant about the more complicated ways business owners can reduce taxes on large estates. But here are two simple strategies that work well for everyone:

* Annual gifting. The IRS permits every person to make gifts of up to $10,000 per recipient per year on a tax-free basis. For people who plan ahead and make annual gifts during their lifetime to children and grandchildren, this can be an effective tool in reducing the size and tax bills of future estates.

* Second-to-die insurance. These insurance policies are less pricey than traditional life insurance, since they pay benefits only after the death of both husband and wife. Since estate taxes are assessed only when bequests are left to someone other than a husband or wife -- most commonly, when estates pass, after parents' death, to the children -- it's smart to buy enough second-to-die coverage in the name of the beneficiary to pay off future estate-tax bills.

-- Jill Andresky Fraser and Christopher Caggiano




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