Properly assessing and planning for the tax consequences that accompany the transfer of your wealth upon your passing is a crucial component of comprehensive estate planning. Failing to properly assess and plan for the tax consequences that accompany the transfer of wealth can be costly and especially burdensome on your loved ones who inherit your assets. Proper estate tax planning will help to minimize the tax burden on your wealth and ensure that the assets you worked hard for in life will pass as quickly and as intact as possible to your loved ones with a minimal tax burden.
Estate taxes are imposed by the federal government and some state governments on the transfer of a person’s assets upon their death. Estate taxes apply when the decedent has an estate plan such as a will in place, and they may also apply if the decedent dies intestate (without a will or estate plan). Estate taxes come in several forms and usually depend on the value of the property being transferred and the recipient’s relationship to the decedent. An estate tax is imposed directly on the entire estate if the combined value of all of the assets in estate is over a certain amount. The recipients of monetary gifts from the decedent may also be responsible for gift taxes if the monies received are over a certain amount. The transfer of real estate and/or money may also be accompanied with a significant tax burden on the recipient of the property.
The threshold limit of value of an estate and/or gift before taxes apply can changes and the changes are often very significant. The laws provide several methods to assist you in minimizing the tax burden that comes with transferring your wealth upon death. Tuition savings plans, life insurance funded trusts, asset protection trusts and pre-death changes to how your real property is titled are just some of the ways proper planning can help to minimize the amount of taxes your estate and your loved ones will pay upon the transfer of your assets.
It is important to remember that the laws governing estate taxes are continuously changing, vary from state to state, and are extremely difficult to navigate without the advice of an experienced attorney specializing in trust and estate law. Proper estate tax planning begins with a consultation between you and a trusted and experienced attorney who will advise you on the federal tax laws, the tax and gift laws in your state, and tax savings methods available under the law. Once you know how the estate and tax laws will affect the assets held by your estate when you pass you will be better able to make informed decisions and, with the assistance of your trusted attorney, create a comprehensive estate plan.