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Estate Tax Basics

April 13, 2006

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Planning for federal estate taxes is a very complex subject, and anyone hoping to successfully shield hard-earned life-long earnings from the tax collector should consult a professional in this area.

But this basic understanding of estate taxation is important: Federal estate taxation rates are among the highest tax rates in America. After a fixed exemption amount, assets are taxed at a 37 percent rate that rises to about 50 percent--although recent estate tax reform promises to lower these amounts over the years.

Obviously, this is a sizeable chunk of your lifetime of effort--generations of saving and work cut by a third or a half upon the owner's death. But there are important exceptions written into the estate taxation laws. You can go a long way toward preserving your wealth and business if you take advantage of:

• the unlimited marital deduction
• the unified exemption and gift exemption
• the annual gift tax exclusion
• the family-owned business exemption

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