My Personal Experience

Before starting my independent insurance agency, I spent years running a MetLife Insurance Agency located in the top 1% of the wealthiest counties in the United States, I would get frequent visits from and developed relationships with several top probate attorneys, who specialize in creating wealth protection plans for high net worth clients.

They shared with me many of the strategies that they used with their clients to minimize the effects of estate tax as well as many other taxes.  Some of the strategies discussed in our private sessions included Living Trusts, Charitable Remainder Trusts, Pour-Over Wills, and many other advanced strategies, such as structuring insurance policies to mitigate the devastating effects of existing estate taxes and to properly prepare for the changes to our tax environment that are certain to come in the future.

Basic Information

With this being an election year, I would not be surprised to see even more changes to the constantly evolving and increasingly confusing tax code.

Before we proceed any further, a few definitions are in order:

According to Wikipedia:

  1. An Estate is: the total value of the money or property owned by a person who died.
  2. An Estate Tax is: a tax owed based on the estate of the deceased person
In other words, if a person has a significant amount of assets when they die, a tax must be paid on those assets, before the assets can be distributed to heirs.

Looking back at the 2011 version of the estate tax rules, the first $5 million dollars of a person’s estate is exempt from estate tax.


How Does The Estate Tax Affect Different Sized Estates?

Here are a few examples of different sized estates.

  1. A person who dies with an estate valued at $8 million dollars, will not pay estate tax on the first $5 million in value, but the remaining $3 million in value would be subject to the estate tax.
  2. A person who dies with an estate valued at $4 million dollars, would not pay estate tax on any of their estate value, since the full value is less than the $5 million dollar exemption.
  3. A person who dies with an estate valued at $800 million dollars, would still receive an exemption on the first $5 million dollars in estate value, but the remaining $795 million would be subject to estate tax.


Who does the estate tax affect?

According to Nolo, the exemption on the first $5 million in estate value, is so large that 99.5% of all estates will not owe any tax.

While that fact may initially seem comforting to many people, I (and I suspect many of my readers) would much prefer to be part of the wealthier .5% of taxpayers who are planning for their estates to be worth much more than $5 million.



In what many people might have considered a premonition, 1 year before his death in 1790, Ben Franklin wrote a letter which read “‘In this world nothing can be said to be certain, except death and taxes”.

That statement is as true today – 223 years later – as it was the day he said it in 1789.

In a life full of uncertainties, we should all be prepared for when both of those certainties occur.

Filed under: Saving MoneyWealth

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