Selected Estate Planning Strategies for Persons with Less than $3 Million

Abstract

In general, people of modest wealth cannot easily afford to give up significant amounts of wealth during lifetime to achieve estate planning goals, although the lifetime transfer of wealth is one of the most useful techniques for reducing taxes. Individuals of modest wealth face a real tension between opportunities to reduce taxes and protect assets from other claims that may arise, on the one hand, and the need to preserve adequate wealth to ensure the maintenance of a current standard of living, on the other hand. This article explores selected estate planning strategies for moderately wealthy people including: assigning life insurance and other non-income-producing assets; creating qualified personal residence trusts; using the annual exclusions; creating a self-settled Alaska trust; using the gift tax exemption and the GST exemption; estate building and income tax sheltering with life insurance; assessing income tax-free states; using a CRT to build wealth and generate income; paying directly for family members' medical care and tuition expenses; and handling interests in qualified plans, IRAs and other IRD.

Keywords: estate planning, moderately wealthy, moderate wealth, life insurance, Alaska trusts, life insurance, charitable remainder trusts, annual exclusion, gift tax exemption, GST exemption

JEL Classification: K11, K19, K34