Definitions

MISSOURI SOUTHERN FOUNDATION

In Support of Missouri Southern State University

Estate Tax

is a special tax on property left by a deceased person. Estate tax is imposed on all estates, but there is a "Unified Credit" for each estate that in effect allows estates with less than the credit amount to pass to your heirs without estate tax. The Unified Credit will gradually increase until 2009 as outlined in the chart below.

There is no estate tax due on assets left to your spouse or a qualified charity. Therefore, if you leave less than the amount specified in the Unified Credit table to your children and the remainder to your spouse or charity you will avoid all estate tax. The surviving spouse will however owe estate tax at the time of his/her death if the property is not left to charity.

Year	Unified Credit Amount	Maximum Rate
2001	$675,000	55%
2002	$1,000,000	50%
2003	$1,000,000	49%
2004	$1,500,000	48%
2005	$1,500,00	47%
2006	$2,000,000	46%
2007	$2,000,000	45%
2008	$2,000,000	45%
2009	$3,500,000	45%
2010	Tax Repealed	0%

Probate

is the formal, court-supervised process, which validates your will and distributes assets to your heirs. All wills pass through this process and in many instances it is desirable to avoid probate. Probate costs on average are about 7 percent of the total value of the estate. The process is time consuming ranging from a few months to two years in some cases. Typically while your estate is in probate the assets are unavailable to your heirs without approval from the probate court. Also the details of your estate become part of the public record when your estate enters probate.

In many instances it is preferable to create a trust to manage and distribute your assets since assets held in trust are not subject to the probate process.

A trust

is a set of instructions for distributing your assets to your heirs. It is created by a legal arrangement and assigns a trustee to manage the assets placed in the trust.

The trustee

is named when the trust is created and this individual or institution controls or distributes the assets according to the terms of the trust.

Assets in a revocable

trust can be given now but the owner retains the right to take back the property from the trust if necessary.

Assets in an irrevocable

trust cannot be removed from the trust. The donor must be certain they no longer need these assets because once the property is placed in trust they cannot be returned to the donor.

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