April 2012, Volume 1, Issue 2

In last month's newsletter, I addressed non-taxation reasons for advanced estate planning. Next month, we will look at quantifying the financial benefits of a wealth preservation estate planning strategy. But first, I thought it would be useful to review which assets are included in one's taxable estate. (Don't we all enjoy thinking about taxes in April?) In fact, valuing your estate as accurately as possible should be one of the first steps in the planning process.
These may seem obvious, but there are some assets that people often overlook. The gross value of your estate may be bigger than you think it is, which is both a blessing and, from a taxation perspective, a curse.  


Following is a list of assets that are included in your gross estate:


Bank Accounts, Investment Accounts, Stocks and Bonds held in certificate form, U.S. Savings Bonds

These types of assets are included in your estate. However, the value may change depending on whether the accounts are held solely by you or are shared with someone else. If the account is in your sole name or in your Revocable Living Trust, the entire value is included; if the account is in joint names with your spouse with rights of survivorship, only 50% of the value is included; if the account is in joint names with someone other than your spouse with rights of survivorship, 100% of the value may be includable; if the property is in joint names as tenants in common, only your proportionate interest is included. 


Life insurance


The value of life insurance proceeds insuring your life are included in your gross estate if the proceeds are payable: (1) to your estate, either directly or indirectly; or (2) to named beneficiaries, if you possessed any incidents of ownership in the policy at the time of your death.


Real estate, Automobiles, Boats, and Airplanes


As is the case with the financial assets listed above, the entire value of these types of property may or may not be included, depending on whether you share ownership with a spouse or someone else and the terms of the shared ownership.


Personal belongings, household goods, and collectibles


This includes furniture and furnishings, clothing, jewelry, antiques, art work, books, guns, computers, TVs, and other electronics.


Monies owed to you


Any personal loans you have made, wages, bonuses, and royalties owed, or mortgages held buy you are included in your gross estate.


Closely held business interests


This category includes sole proprietorships, partnerships, limited liability companies and stock held in closely held corporations. The value of your ownership interest is included.


Trust assets


Certain trusts of which you are a beneficiary, including any trust over which you have a "general power of appointment," will be included in your gross estate at the full value of the trust property.


Taxable lifetime gifts


These are gifts that you made in excess of the annual gift tax exclusion amount in the year in which you made the gift.


Certain transfers made within three years of death


This includes life insurance owned by you and transferred into an Irrevocable Life Insurance Trust within 3 years of your date of death.



When it is time to settle your estate, various expenses and liabilities will be subtracted from the value of your gross estate. In the meantime, there are steps you can take to minimize the value of your gross estate, if necessary, to ensure that your wealth is preserved for future generations.  



About Pierson & Strachan

Pierson & Strachan P.C. is a law firm serving clients throughout Lake and Cook Counties specializing in estate planning and probate, real estate and land use, business law, and other contract matters. From issues that affect your family to those that impact your business, our attorneys combine cutting-edge technology with personal service to vigorously represent your interests and get you the results you need. Read more>>


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Pierson & Strachan, P.C.
Craig Pierson
Attorney at Law

I will periodically send newsletters pertaining to topics I believe may be of interest to clients and friends.  Thank you for reading, and please forward to anyone else who you believe might be interested.  I appreciate your referrals!
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This information may address some questions, but is not intended to be a comprehensive analysis of the topic or legal advice.  Independent tax and legal advice is recommended.