Do estate taxes need to be considered in structures?
Yes. The present value of the guaranteed payments from a structured settlement remaining at the death of the annuitant may be included by the IRS in the decedent’s taxable estate. (Section 104 excludes payments from income tax, not estate tax.) In a few years, the amount excluded from estate tax will be up to $1 million for an individual, $2 million for a married couple. (It is $675,000 for an individual in 2000.) While there may be no estate tax due when the structured settlement payee dies, if the wife will receive the remaining guaranteed payments, there could be estate tax due at the second death. Care should be taken to provide enough liquidity to pay estate taxes. This can be accomplished by maintaining a cash reserve outside the structure, or by opting for a cash refund from the annuity in the structure. There are also other methods of providing estate tax liquidity, such as using life insurance owned by a trust outside the estate, funded from the unified credit or through annua
