My wife and I have a combined estate with a net worth of $3,000,000 or more. What can we do to avoid estate taxes?
Your estate and your spouse’s estate each have a federal estate tax exclusion amount of $2,000,000 for 2007. Let’s say, for example, that you die before your spouse does and your spouse inherits your entire estate. Because of an “unlimited marital deduction” under the federal tax code, you will not have any estate tax liability and your exclusion amount will not be used. However, if your spouse dies in 2007 or 2008, your spouse’s estate will be equal to $3,000,000 or more and will be subject to an estate tax of approximately $450,000 or more. Your spouse’s estate will not be able to use your exclusion amount to reduce the estate tax. But you can reduce the amount of this tax or avoid it altogether by creating an irrevocable bypass trust. This trust allows you to transfer a portion of your estate of a value of less than or equal to your estate tax exclusion amount to this second trust (usually called a bypass trust) so that it will not be transferred into your spouse’s name. The assets
