Estate planning helps you maximize the value of your estate so that you can pass it on to your loved ones.
It’s also the best way to reduce any expenses related to tax obligations and other financial risks.
Estate planning helps you minimize your estate taxes so that there’s more left over to distribute to beneficiaries.
Knowing how estate planning helps you achieve this and other financial goals is critical to getting the most out of your estate plan.
Estate Taxes and Personal Finances
The transfer of assets through an estate plan requires beneficiaries to pay federal taxes. Without the right estate plan, some individuals could be at risk of paying more in taxes than the value of their estate.
Other expenses such as legal fees and probate costs can further reduce the value of your estate and the benefits that are received by your loved ones.
For business owners, failing to create a sound estate plan could cause your business assets to be at financial risk.
Federal estate taxes can be as high as 55 percent. There are time restrictions related to when and how they can be paid.
Assets may need to be liquidated in order to help family members meet any estate tax obligations. This common issue can be avoided through estate planning.
Consulting with an estate planning attorney helps you determine your unique needs and the strategies you can use to address them.
Using a Trust to Lower Your Estate Taxes
A trust is one of the most effective estate planning tools you can use to protect your beneficiaries from estate taxes and other surprise expenses.
Creditors, competitors looking to purchase your business at a cost that’s below market value, and others can reduce the value of your estate if you don’t plan ahead.
Irrevocable trusts are established in a way that prevents any changes to be made. The assets in an irrevocable trust are transferred after the death of the trust’s grantor.
A revocable trust provides more flexibility, as its terms can be modified during the grantor’s lifetime to reflect any changes that occur within that time.
Transferring Wealth Before the Time of Death
The transfer of wealth before death is an estate planning strategy that can help you avoid high tax rates and secure the value of your estate for your beneficiaries.
By transferring wealth to others, you reduce the taxable amount of your estate over time.
There are rules related to gift taxes and other transfers. This includes a $14,000 limit on transfers made to other individuals in a single year before a gift tax is incurred.
There are exemptions and other rules to consider. So you should consult with a skilled estate planning attorney to understand the best strategies for your needs.
Reducing the value of your estate minimizes estate taxes while allowing your loved ones to receive the most value out of your estate plan.
Other estate planning options help you minimize your estate taxes. Your estate planning professional will take the time to consider all of your needs and financial goals.
With the right estate plan, you leave behind a legacy that supports the financial wellbeing of your loved ones and protects your financial interests for the future.