Many people underestimate the value of their estates for estate tax purposes and fail to take the proper tax planning measures to minimize the estate taxes that may reduce the size of the estate available to their beneficiaries. The advice of a competent estate planning attorney should be sought to accurately determine the value of your estate and the potential benefits of estate tax planning.

Two concepts are fundamental to estate tax planning:

• The "unlimited marital deduction" and
• The "unified credit" provided by the tax laws

The unlimited marital deduction makes most transfers between spouses, either by gift or bequest, regardless of size, tax-free so long as you are both United States citizens. Thus, you may leave your entire estate to your surviving spouse and no estate tax will generally be due upon your death.

However, upon the death of the second spouse, estate taxes will be owed if your joint assets exceed an exemption equivalent amount established in the tax code that is applicable in the year of death. Therefore, the marital deduction only defers taxation.

Nevertheless, the marital deduction is important in that deferring the estate tax liability gives the surviving spouse and family more money for support and investment during the life of the surviving spouse and the surviving spouse may be able to further reduce the estate by making lifetime gifts to family members.

However, certain disadvantages must be weighed against these benefits:

1. The surviving spouse's estate may be taxed at a higher marginal estate tax rate by virtue of the stacking of both spouse's estates on top of one another and as a result of appreciation in the value of the assets during the survivor's lifetime;
2. The property transferred to the surviving spouse must be left either outright or in a special trust to satisfy certain legal requirements: and
3. If a trust is used for the assets, distributions cannot be made to any person other than the surviving spouse. All of these tax rules are very complicated and a knowledgeable and experience estate planner who is a licensed attorney at law is required.

The unified credit derives its name from the fact that transfers of property to family members or others will be taxed in the same way regardless of whether the transfer occurs during life or at death because of the general unification of the estate and gift tax laws. Active estate planning and document preparation with the assistance of an attorney knowledgeable in estate planning and tax law is required to achieve tax savings. The methods for transferring your assets so as to enjoy the benefits of the unlimited marital deduction and unified credit are many and complex, further warranting the advice and assistance of a qualified estate planning attorney. Contact us.

Estate Planning, Wealth Accumulation, and Protection Telephone: (804) 935-8510 ● Secondary Telephone: (804) 364-5071 Fax: (804) 364-6387 ● E-Mail Us
Street Address: 4860 Cox Road, Suite 200 Glen Allen, VA 23060 Map and Driving Directions	Mailing Address: P.O. Box 4066 Glen Allen, VA 23058-4066
Virginia estate planning attorney Robin S. Gnatowsky, CFP,® is a CERTIFIED FINANCIAL PLANNER™ practitioner, a certified public accountant (CPA), and an attorney focusing on financial planning, tax planning and estate planning. Richmond ● Glen Allen ● Midlothian ● Virginia Beach ● Virginia ● Florida ● Maryland ● Washington, DC