Your Legacy

“A good man leaves an inheritance to his children’s children.”


-King Solomon

Before you can understand inheritance tax laws, you must first understand the difference between inheritance taxes and estate taxes. Estate taxes are taxes levied by the federal government, and state governments in several states, on the estate of a decedent.The entire estate is valued, including assets and debts, and the estate itself is responsible for paying taxes before property is distributed. Inheritance tax, on the other hand, is a tax that only applies in certain states and is paid by the recipient of the property instead of the estate itself.

By not planning you will very likely be leaving money to the government instead of your family. With proper planning you can all but eliminate both taxes. Below are two planning tools we use.

Living Trust

The benefits of a living trust are as follows:


  • Avoid probate (keep personal business a secret)

  • Abnormality: can be named differently than trustee’s Social Security number

  • Can use both lifetime exemptions: husband $5,250,000/wife $5,250,000

  • Can protect children and surviving spouse from mismanagement of assets (qualified terminal interest property)

Family Limited Partnership

Enables one to transfer ownership yet maintain control!
Divided into two parts, General Partner and Limited Partner

  • General Partner – all managerial control can be an L.L.C. or a Corporation, cannot gain access to assets unless seize control of the General Partner (51% or more)

  • Limited Partner – hold all assets, no managerial control

Living trust can be a limited partner

The IRS allows discounted value up to 20% on assets you do not control.

ProFocus Incorporated

Michael M. Smith, CFP®


5010 East Warner Road,
Phoenix, AZ 85044

480.598.9960 Phoenix, AZ
202.800.0707 Washington, DC
480.893.1149 Fax