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There are two types of death taxes that you’ll be concerned about: the federal tax and Vermont taxes. The federal tax will be computed as a percentage of your net estate. A net taxable estate is comprised of all assets you own or control minus certain deductions.
The taxable estate is your assets then subtracted by all liabilities and deductions such as funeral expenses, bequests to charities and value of the assets passed on to your spouse.
The IRS allows every married individual to give an unlimited amount of assets either by gift or bequest, to his or her spouse without the imposition of any federal taxes.
A Credit Shelter Trust, also known as a Bypass or A/B Trust can potentially reduce federal taxes and typically deployed by a married couple. For example, in 2022, every individual is entitled to a federal estate tax exemption on $12.06MM of their assets.
The Irrevocable Life Insurance Trust [ILIT] retains the death benefits of your life insurance policy outside the Probate Estate and therefore not subject to estate taxes.
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