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 2008, the amount is $2 million; in 2009 it is $3.5 million; in 2010 it is unlimited; and in 2001 and beyond it is $1 million with annual cost of living adjustments.
For Estates that are valued over the $1 million dollars, or $2 million for a married couple with a properly drafted trust, in 2011 their Estate will be assessed the EIT upon their passing. The maximum tax rate in 2011 is 50% of the estate. For example, if a Married Couple's Estate is valued at $10 million in 2011, the will be assessed a 50% tax on the amount of assets over the $2 million. This would amount to a $4 million tax.
The use of Advance Estate Planning Techniques provides an avenue to reduce or eliminate this EIT. We can reduce the EIT by using Discounting Methods, Freezing Methods, Charitable Methods, and Marketability Methods.