Estate Planning Insurance Considerations

What Are the Estate Growth Implications for a Married Couple?

In a properly arranged estate, the size of a married couple's estate at the death of the surviving spouse determines the estate taxes due. Consider the following:

Current Ages of Spouses Additional Years to Estimated
Joint Life Expectancy*		 Estate Growth Rate Factors
MaleFemale  5%8%10%
40 40 49 10.921 43.427 106.719
50 45 42 7.762 25.339 54.764
50 50 39 6.705 20.115 41.145
55 50 37 6.081 17.246 34.004
60 55 32 4.765 11.737 21.114
60 60 30 4.322 10.063 17.449
65 60 28 3.920 8.627 14.421
70 65 23 3.072 5.871 8.954
70 70 21 2.786 5.034 7.400
75 70 19 2.527 4.316 6.116
* Based on IRS Annuity Table VI.

FOR EXAMPLE...

A husband age 55 and wife age 50 with an estimated $1,000,000 estate today can expect to see it grow to $17,246,000 at 8% by the time the surviving spouse dies in 37 years. This results in the following estate settlement costs and estate shrinkage, assuming that no part of the estate growth is consumed:
$17,246,000   Estate
-     862,300   Administration Costs (5%)
-  8,625,220   Federal Estate Tax (1)
$  7,758,480   Net Estate to Heirs

$  9,487,520 Total Estate Shrinkage (55%)

(1) Based on the estate reduced by administration costs, on 2001 estate tax rates and a $1 million unified credit equivalent. The Economic Growth and Tax Relief Reconciliation Act of 2001 repeals the estate tax for one year –2010. Under that law, the federal estate tax continues, but with increasing unified credits and decreasing top estate tax rates, until 2010 when it is repealed only for that year. Without future Congressional action, the 2001 federal estate tax rules will be reinstated in 2011, but with a $1 million exemption equivalent (as scheduled to increase prior to the Act).

What Are the Estate Growth Implications for a Single Person?

In the case of a single person, the size of the individual's estate at death determines the estate taxes due. Consider the following:

Current Age Additional Years to
Estimated Life Expectancy* 		Estate Growth Rate Factors
   5% 8% 10%
40 43 8.150 27.367 60.240
45 38 6.385 18.625 37.404
50 33 5.003 12.676 23.225
55 29 4.116 9.317 15.863
60 24 3.225 6.341 9.850
65 20 2.653 4.661 6.727
70 16 2.183 3.426 4.595
75 13 1.886 2.720 3.452
80 10 1.629 2.159 2.594
* Based on IRS Annuity Table VI.

FOR EXAMPLE...

A single person age 65 with an estimated $1,000,000 estate today can expect to see it grow to $4,661,000 at 8% by the time death occurs in 20 years. This results in the following estate settlement costs and estate shrinkage, assuming that no part of the estate growth is consumed:
$ 4,661,000   Estate
-    233,050   Administration Costs (5%)
- 1,730,373    Federal Estate Tax (1)
$ 2,697,577   Net Estate to Heirs

$ 1,963,423 Total Estate Shrinkage (42%)

(1) Based on the estate reduced by administration costs, on 2001 estate tax rates and a $1 million unified credit equivalent. The Economic Growth and Tax Relief Reconciliation Act of 2001 repeals the estate tax for one year –2010. Under that law, the federal estate tax continues, but with increasing unified credits and decreasing top estate tax rates, until 2010 when it is repealed only for that year. Without future Congressional action, the 2001 federal estate tax rules will be reinstated in 2011, but with a $1 million exemption equivalent (as scheduled to increase prior to the Act).

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