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Estate Taxes


  • Benefits: A refusal to accept property allowing for the property or interest in property to be treated as an entity that has never been received and therefore can be used to avoid federal estate tax and gift tax, and to create legal inter-generational transfers which avoid taxation, provided they meet the following set of requirements: (1) The disclaimer must be made in writing and signed by the disclaiming party; (2) The disclaimer must identify the property, or interest in property that is being disclaimed; (3) The disclaimer must be delivered, in writing, to the person or entity charged with the obligation of transferring assets from the giver to the receiver(s); (4) The disclaimer must be written less than nine months after the date the property was transferred. In the case of a disclaimant aged under 21, the disclaimer must be written less than nine months after the disclaimant reaches 21.

Federal Estate Taxes

  • The estate tax in the United States is a tax imposed on the transfer of the “taxable estate” of a deceased person, whether such property is transferred via a will, according to the state laws of intestacy or otherwise made as an incident of the death of the owner, such as a transfer of property from an intestate estate or trust, or the payment of certain life insurance benefits or financial account sums to beneficiaries. The estate tax is one part of the Unified Gift and Estate Tax system in the United States. The other part of the system, the gift tax, imposes a tax on transfers of property during a person’s life; the gift tax prevents avoidance of the estate tax should a person want to give away his/her estate. In addition to the federal government, many states also impose an estate tax, with the state version called either an estate tax or an inheritance tax. If an asset is left to a spouse or a Federally recognized charity, the tax usually does not apply. In addition, up to $5,000,000 can be given by an individual, before and/or upon their death, without incurring federal gift or estate taxes

529 Education Plan

  • A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code, which created these types of savings plans in 1996.
  • Tax benefits include: (1) Federal tax benefits: 529 plans offer unsurpassed income tax breaks. Although your contributions are not deductible on your federal tax return, your investment grows tax-deferred, and distributions to pay for the beneficiary’s college costs come out federally tax-free. (2) State tax benefits (3) Donor retains control of funds: You, the donor, stay in control of the account. With few exceptions, the named beneficiary has no rights to the funds. (4) Low maintenance: a 529 plan can provide a very easy hands-off way to save for college. Once you decide which 529 plan to use, you complete a simple enrollment form and make your contribution (or sign up for automatic deposits). (4) Simplified tax reporting: You won’t receive a Form 1099 to report taxable or nontaxable earnings until the year you make withdrawals. (5) Flexible: If you want to move your investment around you may change to a different option in a 529 savings program every year (program permitting) or you may rollover your account to a different state’s program provided no such rollover for your beneficiary has occurred in the prior 12 months. (6) Substantial deposits allowed: Everyone is eligible to take advantage of a 529 plan, and the amounts you can put in are substantial (over $300,000 per beneficiary in many state plans). In CA, Up to $12,000 can be contributed each year to a 529 plan without having to file a gift tax return. Contributions can continue until the account reaches $250,000. If a gift tax return is filed, gifts of more than $12,000 may be made during a calendar year.


  • Benefits: To minimize or eliminate federal estate taxes for a married couple. The most obvious benefit is $10 million worth of estate tax exclusion, which is about three times higher than the previous high of $3.5 million in 2009.  The amount is so high that many decedents could make substantial gifts or bequests, and still leave a high amount of portability to the surviving spouse.
  • Current federal law gives each taxpayer a $5.12 million exclusion from the federal estate tax. If someone dies and their total estate, including gifts made during their lifetime, does not exceed $5.12 million, their estate does not owe federal estate taxes. Portability allows the surviving spouse to use the exclusion that the first spouse to die did not use. If the first spouse to die gave all of his or her estate to the surviving spouse, the surviving spouse will wind up with a maximum $10 million exclusion.
  • What are the problems with portability? The surviving spouse must elect to use portability by filing an estate tax return for the estate of the first spouse to die.  The estate tax return must include the election for portability, which is probably accomplished by simply checking a box.  However, failing to file the return will cancel portability for the first spouse to die.  Estate tax returns are complicated and CPAs will charge thousands of dollars to prepare them. Another problem is that portability applies only to estates of those who died after Jan. 1, 2011.  Estates of decedents who died before that date are subject to the old law, which doesn’t allow portability.
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