fully distributed to your beneficiaries. Federal estate taxes are expensive (historically 45-55) and 
they must be paid in cash, usually within nine months after you die. Because few estates have this 
kind of cash, it has often been necessary to liquidate assets to pay these taxes. 
Your estate will have to pay federal estate taxes if 
its net value when you die is more than the exempt 
amount set by Congress at that time. In 2011 and 
2012, the federal exemption is $5 million and the 
tax rate is 35. If Congress does not act before the 
end of 2012, the exemption in 2013 will be $1 million and the top tax rate will be 55. Some 
states have their own death tax, so your estate could be exempt from federal tax but have to pay 
state tax. 
How is the net value of my estate detemined? 
To determine the current net value of your estate, add your assets, then subtract your debts and 
expenses. Include your home, business interests, bank accounts, investments, personal property, 
IRAs, retirement plans and death benefits from insurance policies. Keep in mind that estate taxes are 
based on the values when you die; your assets may appreciate between now and then. 
What can I do about estate taxes? 
If you plan ahead, you can reduce or eliminate estate taxes. For example, if you are married, you 
can make sure you and your spouse use both your estate tax exemptions. Unfortunately, most mar- 
ried couples leave everything to each other which, although easy, can be a tax trap. Here's why. 
Let's say Bob and Sue have a combined net estate of $10 million and they both die in 2011 or 
2012. Bob dies first and leaves everything to his wife, Sue. Because she is a U.S. citizen, Bob can 
leave her an unlimited amount and no estate tax will be due when he dies. When Sue dies, her 
estate of $10 million uses her $5 million exemption. The tax bill on the remaining $5 million? 
$1,750,0001 The problem with leaving everything to your spouse is you waste an exemption. 
Congress tried to fix this. If one spouse dies in 2011 or 2012, the executor of the estate may trans- 
fer any unused federal estate tax exemption to the surviving spouse. But there are still problems. 
For example, let's say Sue marries Tom after Bob dies; if Tom dies before Sue, she will lose all 
of Bob's unused exemption. In addition, by leaving everything to Sue, Bob has no control over 
his share of their estate; Sue can do whatever she wants with the assets, including disinheriting 
Bob's children from a previous marriage. And when Sue dies, the entire estate, including any 
growth on the assets, will be taxed at rates in effectat that time. 
If Bob and Sue plan ahead, they can use 
both of their exemptions and pay no 
estate taxes. A tax-planning provision 
in their living trust splits their $10 mil- 
lion estate into two trusts of $5 million 
each. \Vhen Bob dies, his trust uses his 
$5 million exemption. When Sue dies, 
her trust uses her $5 million exemption. 
This reduces their taxable estate to $0, 
so the full $10 million can go to their 
beneficiaries. (Your attorney may prefer 
to start with two separate trusts instead 
of one as shown here.) 
How A LIVING TRUST SAVES ESTATE TAXES 
BOB 6c SUE 
$10 MILLION 
SUE'S TRUST 
BOB'S TRUST 
$ 5,000,000 
$ 5,000,000 
-5,000,000 EXEMPTION 
$ 	0 TAXABLE ESTATE 
-5,000,000 EXEMPTION 
$ 	0 TAXABLE ESTATE 

BENEFICIARIES 
$10 MILLION 
Tax planning in a living trust letsyo« and ]our spouse 
use both]our estate tax exemptions. Using the 2011 and 2012 exemp- 
tion and tax rate, ]OU could transfer up to $10 million estate tax free to 
. ]our loved ones, saving up to $1,750,000 in federal estate taxes. 
Year of 
Death 
Top 
Tax Rate 
Exempt 
Amount 
2011 and 2012 	$5 million 	35 
2013 and after 	$1 million 	55 
There are other benefits to this planning . 
For example, Bob can keep control over 
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