Many clients are familiar with making transfers to trusts and using Crummey notices to make the transfer qualify for the annual $12,000 gift tax exclusion. This makes the transfer gift-tax free.

However, with dynasty trusts, the IRC may impose a second tax called a generation-skipping tax (GST). The GST is currently a flat 45% tax, so it is very important to avoid its bite.

The new rules under the IRC call for an "automatic allocation" of your $2 million exemption from the GST tax on all dynasty trusts. (You should also know that some trusts which are not true dynasty trusts also fall within the definition of a dynasty trust or GST trust under the new rules.) That may seem helpful, but the method in which the exemption is allocated may not be in your best interests. Accordingly, many clients choose to calculate the exemption on their own usually saving some of their GST exemption.

Your CPA should probably file a Form 709 annually to protect you and your family; the CPA (rather than the IRS) will keep track of the exemption used and probably save you more money than having the IRS track the exemption. Often, with larger gifts to dynasty trusts, CPA's will elect to file the Form 709 late thereby saving even more exemption. Remember, this may need to be filed annually!

Your estate can typically avoid probate if you create a living trust and fund it properly during your lifetime. The law requires a probate estate to be opened if the assets held in your name individually total $100,000.00 or more in value. You can avoid the $100,000.00 threshold by transferring title for your more valuable assets to your living trust.

A deed will need to be prepared to transfer title for any real estate. (Lenders holding a mortgage against a property may need to approve a transfer of real estate.) For banking and mutual fund accounts, you would typically complete a simple form provided by the bank or brokerage house to change title on the account. If you wish to transfer certificated shares of stock or bonds to the trust, you will need to complete documentation required by the issuer.

Probably one of the most important things you can do is to enter into a written shareholder agreement with this person. The agreement can place restrictions on a shareholder's ability to sell his shares to outside parties and address other important issues such as how and when shares may be redeemed.

Too often we receive this question after sale documents have been signed or the transaction has been completed. There are many alternatives available to those who seek counsel well before a sale is formalized. After a sale, other techniques exist but they are far less effective than pre-sale planning.

This is a frequent question which requires thorough knowledge of your estate plan and assets. Some of the most frequent errors we see involve naming beneficiaries of retirement accounts. This is especially important given that retirement accounts often constitute a very large portion of a person's estate.

Joint tenancy is a wonderful method of holding assets for those with very modest estates. We have often said, however, that joint tenancy is inappropriate in a taxable estate. Specifically, the use of joint tenancy may prohibit a person from fully using their $2 million exemption equivalent. (See Case Study 1a on the web page.) We have also seen many cases where a parent will name one child as a joint tenant on assets and omit other children. This can cause problems between the children when the parent passes away--especially if the deceased parent's estate planning documents divide the assets equally between the children.

Ordinarily, life insurance proceeds are received income tax free. However, life insurance proceeds are estate taxable. Protecting life insurance proceeds is relatively simple; Case Study 1c on the web page shows the estate tax savings enjoyed by sample clients putting their policy in an irrevocable trust.

Treasury and IRS issue guidance to encourage use of Health Savings Accounts. Health Savings Accounts were created by the recently passed and signed Medicare bill, and designed to help individuals save for qualified medical and retiree health expenses on a tax-free basis. The Notice is in a question and answer format. It discusses (among other things) what these plans are, who is eligible to establish them, and how they can be established. Notice 2004-2, http://www.irs.gov/pub/irs-drop/n-04-2.pdf