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This is a complicated topic and legal question that is best left for our clients' attorneys. Considerations include the prevailing federal estate exclusion. As of Year 2016, the federal exclusion was $5.45 million. The annual exclusion for gifts in Year 2016 was $14,000. There is a connection between taxable gifts (i.e., those in excess of the annual exclusion) and the estate exclusion that that should be accounted for in any estate planning. Of course, states have their own plans for your estate that should also be considered when planning.

Life insurance continues to hold a unique place in estate planning due to certain tax provisions pertaining to payouts. Properly structured life insurance policies are one of the most efficient means for transferring assets from an estate to a beneficiary. Generally, if you receive the proceeds under a life insurance contract as a beneficiary due to the death of the insured person, the benefits are not includable in gross income and do not have to be reported.