Currently, the Estate and Inheritance Tax (EIT)is triggered upon the death of each person. In one person's lifetime, they are able to give a specified amount of money to their heirs free of the EIT. In 2013, the amount is $5.25 million. This amount will increase every year based upon cost of living adjustments.
For Estates that are valued over the $5.25 million dollars (2013), or $10.5 million (2013) for a married couple they can avoid paying any EIT if their estates fall within those limitations. The maximum tax rate in 2013 is 45% of the estate. For example, if a Married Couple's Estate is valued at $20.5 million in 2013, the will be assessed a 45% tax on the amount of assets over the $10.5 million. This would amount to a $4.5 million tax.
The use of Advance Estate Planning Techniques has significantly changed over the past few years however, for those people the tax would apply to,these planning techniques can provide additional avenues to reduce or eliminate this EIT. We can reduce the EIT by using Discounting Methods, Freezing Methods, Charitable Methods, and Marketability Methods.