J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

39.8 Take Inventory and Estimate the Value of Your Potential Estate

The first step in estate tax planning follows a simple business practice of taking inventory of everything you own. Listing your belongings takes thought, time, and a surprising amount of work. On your list you should include records of purchases, fire and theft insurance inventories, bankbooks, brokers’ statements, etc. You should also include your cash, real estate (here and abroad), securities, mortgages, rights in property, trust accounts, personal effects, collections, and art works. Life insurance is includible if: (1) it is payable to your estate; (2) it is payable to others and you have kept “incidents of ownership” such as the right to change beneficiaries, surrender or assign the policy, or pledge it for a loan; or (3) you assign the policy and die within three years.

If you own property jointly with your spouse, your estate includes only one-half its value.

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Planning Reminder

Life Insurance

If you are buying a new policy with yourself as the insured, and you want to keep the proceeds out of your gross estate, set up an irrevocable trust to buy the policy or have the individual beneficiary buy the policy. For example, a daughter applies for a $1 million policy on her father’s life and is the policy owner under the terms of the policy. If the father pays the premiums, his payments ...