Did You Consider Taxes When You Did Your Estate Planning?
If not, you should take the time to reevaluate your estate plan. The passing of numerous celebrities (think about Prince) illustrates the need for estate planning that considers the tax ramifications to heirs and beneficiaries. You spend your life accumulating wealth to provide for your family both during your life and after your death. Why would you give a large chunk of it to the IRS?
So, what options provide you with the best tax breaks?
That depends on your situation, but, in general, the following strategies help save on estate taxes.
Make gifts directly to loved ones during your lifetime. The IRS allows you to give up to $14,000 per year to each person you choose without incurring gift tax. Married couples can give up to $28,000. You just need to keep in mind that this reduces your estate tax exemption upon death. Remember, you should leave yourself enough money to live on as you contemplate making gifts, and you should also stay abreast of changes in the estate tax laws.
Put unlimited amounts directly into qualified education and medical plans. These contributions do not reduce your exemption.
A marital trust allows your surviving spouse to take advantage of your exemption amount. In addition, assets in the trust avoid probate, which makes them immediately available to your spouse.
If you have children from a prior relationship, consider using a qualified terminable interest property (QTIP) trust. During the remainder of your surviving spouse's life, he or she will receive distributions from the trust, and upon death, the remainder of the trust's assets will pass to your children even if your spouse remarries at some point after your death.
Also, consider using life insurance policies to reduce or eliminate tax burdens. However, if you own the policy within three years of your death, it remains part of your estate. An irrevocable life insurance trust can purchase the policy and hold it on behalf of the beneficiary to avoid this eventuality.
These are just a sampling of what estate planning does to reduce the potential estate taxes that would otherwise diminish inheritances to your loved ones. An attorney could explain other options to you, depending on your needs and wishes. An attorney understands all of the associated tax ramifications of estate planning, allowing you to receive the maximum benefits possible from the flexibility and customization of estate planning.
Rignanese & Associates is available to work with clients on their estate planning. Please reach out to us at 863.294.1114 or email us an inquiry via the CONTACT us page on this website.
By J. Kelly Kennedy, Attorney/CPA, PLLC posted in Estate Planning on Thursday, February 2, 2017. Tags: estate planning