Can a married couple avoid the taxes of four million dollars?

    Published: 06-16-2009
    Views: 9,825
    Estate Expert William Conway discusses how a married couple can avoid the taxes of four million dollars.

    Host: Can a married couple avoid the taxes of four million dollars?

    William Conway: Absolutely, a married couple can have four million dollars protected but only if they plan. What most people fail to do is understand the use of what we call the coupon. So, if a husband gives everything he has to wife or the wife gives she has to the husband and they had exactly four million dollars of assets, what happen is that the husband s coupon if he were the first to die would die unused. Like most coupons that I am familiar with, coupons have an expiration date. Whether it is matter of getting a free extra pizza or a matter of getting some free entry to an amusement park, the coupon has an expiration date. In this particular case, the coupon has the expiration date of the date of the person to whom the coupon is issued. Each of us essentially has a coupon issued to us by the federal government and the expiration date is the date of our death. So, if we fail to use the coupon, then the coupon expires and the net result of that is that the surviving spouse if she received 100% of the husband s assets and assume that he has exactly two million, assume she had exactly two million for the total of four, she would have four million dollars of assets, while her coupon is only good for two million dollars. So, in order to be able to use the husband s coupon, the assets have to flow into trust especially setup for the wife and that trust is already within the instructions of the revocable trust that we began talking about. The trust says that at the date of death of the first of the husband to die or the wife to die, the assets equal to the coupon amount in this case two million dollars will flow into a special trust over which the surviving spouse maybe the trustee and from which she may take what she needs for her health, her education, her maintenance report, take what she needs for purposes of emergencies or any other purpose that she has. But if any assets remain in that trust at the date of her death, those assets will not be subject to estate tax at the date of her death and that is true whether that sum of money is still two million or less then two million or if it many times exceeds the value of two million. So, the coupon amount is pretty critical. It is important that people understand that once again, it is important to plan because you do not get the availability of two coupons unless you have planned to use them.