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One of the most crucial aspects of estate planning includes minimizing taxes to ensure that the maximum value of your assets passes to your loved ones. An estate planning attorney can help you understand legal strategies that can help you and your family keep estate taxes low.
Understanding Estate Taxes
When a person dies, state and federal governments impose taxes on the transfer of their assets through the estate administration process. The government calculates all the assets in a person’s estate at their death to determine their value, including real estate, vehicles, stocks, bonds, annuities, insurance benefits, and business interests. When an estate exceeds the government’s taxation threshold, the government will impose a tax on the value of the assets above the threshold.
For some families, estate taxes can significantly reduce the value of hard-earned assets and wealth passed on to succeeding generations. This makes understanding and employing estate taxation strategies crucial to preserving family wealth.
Essential Estate Planning Strategies to Minimize Estate Taxes
Some of the most commonly used estate planning strategies to mitigate estate tax liabilities include:
Lifetime Gifting Strategies
Individuals may rely on lifetime gifting strategies to reduce the value of their estate for taxation purposes. One of the most common gifting strategies includes leveraging the annual gift tax exclusion, which allows people to give specific amounts of money per person per year tax-free. Leveraging the annual gift tax exclusion can help move money out of an estate to loved ones who would otherwise inherit from the estate.
Other direct payments can qualify for tax-free treatment that reduces estate tax liabilities, such as paying for a loved one’s educational or medical expenses.
Trusts
Certain types of trusts can also serve as an estate planning strategy to reduce taxes. In most cases, irrevocable-type trusts qualify individuals and families for reduction of estate tax liabilities. While revocable trusts allow people to manage assets during their lifetime, those assets do not legally leave the person’s estate, remaining available for taxation upon death. However, because irrevocable trusts do not allow grantors to recover assets placed in the trust, those assets do not count against the grantor’s estate for taxation purposes. Irrevocable trusts can also provide many of the same benefits as revocable trusts, including avoiding the time and expense of probate.
Charitable Giving
Careful estate planning incorporating charitable giving to qualified organizations can help reduce estate taxes. Individuals and families can use charitable lead or remainder trusts to organize their charitable giving and qualify for tax benefits. They can also mitigate estate tax liabilities by passing assets out of an estate into a trust designed to donate those assets to qualifying charitable causes.
Portability of Estate Tax Exemptions
Under federal law, a surviving spouse can “inherit” the unused portion of their deceased spouse’s estate and gift tax exemption. Although surviving spouses must affirmatively elect portability through estate tax filings, a portability strategy can allow married couples to combine their estate and gift tax exemptions to reduce estate tax liabilities when one spouse passes away and leaves most or all their estate to their surviving spouse.
The Importance of Reviewing and Updating Estate Plans
Estate and tax laws can change, and the value of your estate can steadily grow over time, making reviewing your estate plan and its tax implications crucial to minimizing tax liabilities. Your priorities regarding the disposition of your estate can also change, further emphasizing the importance of reviewing and updating your estate plan.
You can best protect your interests by consulting an estate planning attorney following significant life events such as marriage, divorce, the birth of children, inheritances, or significant increases in income and assets.
Talk to an Estate Planning Lawyer Today
Estate taxes can significantly reduce the value of your estate and the hard-earned wealth you plan to pass on to loved ones. An estate planning attorney from the Law Office of Angela Siegel can walk you through strategies that can help reduce your family’s estate tax burden. Contact us today for a free, confidential consultation to discuss your legal options.
At the Law Office of Angela Siegel, we are pleased to offer legal assistance to clients located in Nassau, Suffolk, Queens, Kings, and New York Counties, specifically but not limited to Garden City, Jericho, East Meadow, Mineola, Syosset, Roslyn, Cedarhurst, Woodmere, Hicksville, Plainview, Merrick, Wantagh, Bellmore, Rockville Center, West Hempstead, Little Neck, Douglaston, Bayside, Flushing, Forest Hills, Astoria, etc., as well as clients located within the state of Florida.