When your estate planning goal is to protect your assets and secure your loved ones’ futures, you would want to have as much of your estate to pass down to your heirs. Unfortunately, impending deductions, such as inheritance taxes, may reduce a significant portion of your estate’s value and leave your family with less than you intended.
Nevertheless, there are ways you can minimize potential taxes on your estate and maximize your family’s inheritance.
Possible with the right estate planning tools
Once you have established your estate plan priorities and the taxable portion of your estate, you can choose the appropriate tools to help you reach your goals. Some planning tools that may reduce taxes on your estate are the following:
- Trusts: While living trusts generally do not avoid estate taxes, trusts with tax-saving provisions may somehow reduce taxes on the estate. Moreover, irrevocable trusts may help reduce or eliminate potential taxes since assets in these trusts are no longer the grantor’s and do not form part of the taxable estate.
- Gifts: You can take advantage of the annual gift tax exclusion and gift your heirs and beneficiaries assets without accumulating gift taxes as long as they are within the allowable amount. This method also reduces the size of your taxable estate.
- Charitable donations: If one of your priorities is to leave a legacy to your favorite charity, you can donate any amount to a qualified charitable organization without paying estate taxes.
While these options are promising, there is no guarantee that your assets, especially those in trusts, are shielded from other types of taxes. Any possible tax relief will still depend on the facts and circumstances surrounding your estate and the tools you are considering. Working with an experienced estate planning lawyer can help you create a comprehensive estate plan to reach your goals.
