When a person makes plans for their assets or their estate after they pass away, there is a certain level of Tax Planning that is entailed in this type of estate planning. In most instances, a standard estate or even a wealthy person’s estate can benefit from planning ahead as it relates to taxes.
Standard Estates
For a standard estate, one that is valued under $5 million, Estate Tax Planning Strategies may mean making sure that there are no extenuating tax issues left for the decedent’s beneficiaries to have to contend with. In order to lessen the tax burden of the estate, a person can begin to divvy up their assets before they die and gift them to beneficiaries, thus reducing any potential tax burden that a person may have to face. In addition, tying up liquid assets into life insurance policies that name different beneficiaries is helpful because life insurance policies are not subject to any sort of inheritance or estate tax.
Living Trusts
For wealthy individuals, the devising of a living trust is the best option. Because inheritance taxes are levied against estates worth over $5 million, the taxes that beneficiaries may have to pay, or the amount of inheritance they receive, can be great reduced because of inheritance taxes. Establishing a living trust avoids avoids inheritance taxes.
What is a Trust
A living trust is a document that a person creates, with the help of a lawyer that understands Estate Tax Planning Strategies, which transfers their assets to an executor. However, these assets are still used by the estate owner such as what would be needed to pay bills, purchase clothes, take vacations and the list goes on and on.
Benefits
What this does is it helps eliminate the inheritance tax as the decedent technically does not own anything. In addition, any assets that are going to be transferred from the estate owner to a beneficiary as stated in a person’s last will and testament can be carried out much quicker.
