Remember, your estate includes everything you own at the moment of your death. This obviously includes assets such as cash, stocks, bonds, annuities, real estate, retirement plans, life insurance, even your personal property. Remember also, the gross estate includes all assets transferred to your Revocable Trust, assets over which you have unfettered "control and dominion". Without estate planning, a substantial percentage of your estate will be lost to the government upon death, this can be avoided or at least minimized.

As we know, one useful method ,which I strongly recommend, is the practice of "gifting" to the maximum permissible amount of $11000 per year per recipient; this tool has the ability of dramatically and positively impacting your estate exposure. Annual gifting not only removes taxable assets from your estate, but also allows all future appreciation of the gifted assets to be excluded from your estate and become property of the recipient.

It is important to remember that gifts need not be restricted to cash transfers; permanent life insurance is an appreciating asset that translates into an excellent gift. Many times the transfer of a life insurance policy removes the asset from your estate (an asset which you will never "see" materialize since it is redeemed upon your death), and premium payments can still be continued by the future gifting of your $11000 annual exclusion, or $22000 if married. Careful estate planning determines the prudent method of this gift, if gifted improperly you may well be establishing an estate problem for the recipient; also, if the recipient is a minor this issue must also be addressed. Many times it is preferred to gift life insurance into a trust. The careful implementation of gifting, by utilizing the annual exclusion for the transfer of existing life insurance, is a wise procedure to remove this asset from your estate, and at the same time accomplish another step in prudent estate planning. Remember however, to successfully remove the existing policies from your estate and its tax burden you must survive this gift by three years! Also, consider a gift by the annual exclusion of cash to the recipient so the recipient has the ability to acquire a new life insurance policy that will not be subject to the three-year rule. This of course requires an "insurable interest" in the relationship of the recipient to the donor (maker) of the gift.