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In: Accounting

Mr and Mrs Smith are married and they are both 45 years old and in good...

Mr and Mrs Smith are married and they are both 45 years old and in good health. Mr Smith has $10million of assets in his name while Mrs Smith has $6MM of assets in her name. Both Mom and Dad hold stock in Amazon, Facebook , Ford and JPM and these stocks constiute their wealth. Neither Mr or Mrs Smith have ever worked and all of their wealth comes from inheritance from past generations. The couple has three children and the parents want very much to share their wealth with these kids. Mom and Dad enjoy an affluent life style and they spend $500,000 a year in living expenses and they are not willing to give up this lifestyle. Mom and Dad also have two houses each valued at $7,000,000 a piece in New York City and in Miami. Provide at least 5 estate planning ideas that can be recommended now to this family.

Solutions

Expert Solution

Estate Planning Ideas.

1. Gift : One of the best ways to restirct the imposition of estate tax is by gifting the money to children. As per IRS, an individual can gift upto $14,000 per year per person. If estate tax is more than the limit prescribed, then the individuals can start giving gifts to their children. This will help in reducing the estate tax to be imposed on children.

2. Setting up a trust : If a person has sizeable amount of estate which he or she wants to pass on the children, then one of the most effective way is to setup a trust and appoint a trustee. Trusts can be set up in several ways, but irrevocable, or permanent, trusts may offer the most tax benefits.hen money is put into an irrevocable trust, the assets no longer belong to you. They belong to the trust itself. As a result, the money cannot be subject to estate taxes.  

3. Give money to family members - If you give something to a friend or a family member who is not your spouse or civil partner, so that you no longer get any benefit from it, the value of the gift will still be included in your estate for Inheritance Tax – but only for seven years. Mr & Mrs. smith can give cash or kind to their children now and can live for seven more year considering lower age of 45 years and then the same will not be subject to estate taxes.

4. Charity: If any individual give something as charity then the same is not subject to estate tax. Therefore, MR & Mrs. Smith can given some amount to charity for reducing the estate taxes.

ekkarill92 answered 1 year ago
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