In 2009, any assets below the amount of $3.5 million can be bequeathed to heirs with no federal estate tax penalty. However, assets left to one’s heirs over this estate tax exemption amount will be taxed. Barring any changes by Congress, in 2010 the estate tax will be repealed entirely. However, in 2011, it will be reinstated with an exemption of $1 million and a maximum unified rate of 50%.

Since it is nearly impossible to predict what year one might die, estate tax planning is crucial for all families who have accumulated assets in excess of $1 million. One tool that may be employed to address this issue is a bypass trust. Bypass trusts allow parents to double the amount of money that can be passed on to children tax-free.

When the first parent dies, instead of leaving all their assets to the surviving spouse, assets up to the exemption amount can be left to a trust for the benefit of the children. Therefore, when the second parent dies, he or she may also leave assets up to the exemption amount to the surviving heirs. In this way, parents are able to collectively double the amount they would otherwise be able to leave to children tax-free.

To learn more about, New York Estate Planning, visit elderlawnewyork.com.