The death tax is still alive

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Small Business Administration increased its small business size standards to account for inflation, restoring small business eligibility to those firms that may have lost their small business status because of inflation since February 2002. For more information, visit this site.

Internal Revenue Service set 44.5 cents per mile as the 2006 optional standard mileage rate
used to calculate the deductible costs of operating an automobile for business. That’s a drop from the temporary 48.5 cents per mile adopted in September following Hurricane Katrina, but it’s above the 40.5 cents per mile that was in place for the first eight months of last year.

eCredit, a provider of online solutions for credit and collections professionals, has struck an alliance with Trans-Soft, a software development company for freight forwarding and logistics firms, to jointly offer tools for managing logistics and credit risk.

William Zollars – chairman, president and chief executive officer of Yellow Roadway Corp. -has sold $5.6 million worth of shares in the trucking company in a move to diversify his portfolio. Zollars sold 117,860 shares on Nov. 22 for about $48 each, according to a federal filing. Zollars acquired the shares through the exercise of the same number of options
valued at about $2 million, or $17.21 each.

You can escape the estate tax if your net worth is $2 million or less for an individual or $4 million or less for a couple. That’s the good news. What’s the bad news? On amounts subject to tax over those limits, Uncle Sam eventually will claim 40 percent or more eventually – unless you act to prevent it. If you think those thresholds sounds adequate, consider that the calculation ordinarily includes the fair market value of all your assets, plus life insurance proceeds. Huge stakes in businesses, land or timber could force sale of those assets just to pay the estate tax.

This doesn’t have to happen. “With a bit of planning, a good deal of the tax could be reduced or eliminated entirely,” says William Tate, a CPA who has planned for estate and income taxes for more than 50 years. Tate outlined 10 steps people should take now regarding estate planning:

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· Draft solid documents. You need, at a minimum, a current will properly drawn by an experienced estate planning attorney, a durable power of attorney and healthcare directives. Probate trusts are not always necessary, as some states have a simple, inexpensive probate process.
· Check beneficiaries. People often forget to update all the key documents, such as life insurance or IRAs, as they experience marriages, divorces and the birth of children.
· Ensure that assets are properly titled separately. “This is critical to lowering estate taxes,” Tate says. Married couples today can exclude up to $4 million in assets from the estate tax provided that neither has more than $2 million in net worth in his or her name.
· Take advantage of the annual gift exclusion. In 2006, the limit for a gift excluded from the gift tax is $12,000 per person, so a husband and wife together could give $24,000 to a child, and there is no limit on the number of gifts you can make. You also can give shares or interest in a company, but that might require a valuation study or documented estimation.
· Consider irrevocable life insurance trusts. With high life insurance payoffs, it’s easy to have a taxable estate. “The chief strategy is to use an ILIT, which is a trust that owns the life insurance policy rather than the individual owning it,” Tate says. With a properly administered ILIT – or wealth replacement trust, as it’s sometimes called – life insurance proceeds can be excluded from the taxable estate, potentially saving hundreds of thousands of dollars.
· Consider second-to-die policies. This type of life insurance is on two lives – husband and wife. “The premiums are often less, and if one of the two is uninsurable individually due to preexisting illness, often a policy can be issued on the two lives,” Tate says.
· Move assets into a family LLC. A family limited liability corporation, or LLC, lets you contribute stocks, bonds, closely-held companies and real estate, and give shares while remaining in control. What’s more, you can gift a proportionate share at a discounted value. “This allows, over time, to have a good portion of your estate entirely escape the tax,” Tate says.
· In some cases, consider gifts beyond $12,000. If an asset is appreciating rapidly, it may make sense to make a gift that goes beyond the $12,000 annual limit in order to avoid the tax on a greatly appreciated asset at a later date.
· Plan to use IRA disbursements early. “These can be subject to the 40 percent estate tax and 30 percent or more income tax, for a hefty 70 percent or more,” Tate says. “Obviously Uncle Sam wants you to take out your retirement funds and report them on your returns – so you might as well do it while you can enjoy it.”
· Consider other types of trusts beyond the ILIT. A qualified personal residence trust – often referred to as simply a QPRT – may make sense when parents are in their late 40s or early 50s, Tate says. They can pass on the home for up to one-third of its fair market value and still live in it for 15 to 20 years. Another option is a charitable remainder trust, which provides the grantors an income for life. Any remaining balance at death goes to charity. Or the income from the trust could go to charity each year and the remainder go to heirs.

“You can do the planning yourself, or let your children and the government do it for you,” Tate says. Sounds like an easy choice.

Estate Tax Planning Financial Calculator, courtesy of KJE Computer Solutions LLC, website

Estate Tax Exposure Meter, courtesy of

“Lessons to Plan By: An Estate Tax Update” by Alan K. Clark, July-August 2005 CFMA Journal, website