Most people spend their entire lives working to build a legacy that those they leave behind can enjoy once they’re gone. But in reality, that is often not enough. In addition to building your estate over time, you must also dedicate time to careful estate tax planning to make sure that much of your work isn’t misdirected or lost to taxes. While it’s important to have a will or living trust established to ensure that your estate is divided up as you wish, with an estate tax plan in place you can guarantee that you are able to pass on as much of your assets as possible.
The Importance of Taxation Planning
For the average single person, you can have an estate valued up to $5.45 million before your heirs have to worry about paying estate taxes. While that sum may make some people feel like estate planning is only necessary for the super wealthy, the world’s best financial planners say that you shouldn’t overlook the process. Meeting with an estate attorney and an accountant will not only give you peace of mind but it will help you to sort through many of the complex issues and laws that make up estate taxation. Some of the best ways to make sure your money stays in the family include:
- Drawing Up a Will – This is an obvious first step that many people overlook. In fact, according to a 2014 study, nearly 65 percent of Americans do not have a will and 17 percent feel like they don’t need one. But without a will, your estate will likely be divided up in probate court, leaving your loved ones to pick up the bill.
- Revisit Your Beneficiaries – Some of your assets are not eligible to be distributed through a will but instead ask that you name a beneficiary. In these cases, it’s important to make sure that all information is up to date. Whether you need to remove an ex-spouse as a beneficiary or simply name someone to avoid the account going to a probate court, this will also help you determine where your money will go.
- Set Up a Trust – If you have a sizeable estate that needs to be divided up among multiple family members or you want to make sure that your heirs are ready for the responsibility that comes along with their inheritance, you may want to set up a trust. Trusts offer the most tax benefits and protect the assets from estate taxes.
Understanding Estate Laws
Over the past decade, estate laws have been a hot topic in politics and significant changes have been made several times. The 2013 tax act ensured that the basic $5 million estate tax exemption was made “permanent” but it also included a higher rate of 40 percent. While the law will continue to adjust the exemption level for inflation, with an adjustment to $5.43 million ($10.86 for married couples) in 2015, it also includes an exclusion “portability.” This means that if one spouse passes before the other, the surviving spouse can pass on the unused portion of their late spouse’s exclusion. However, this portability is not automatic and the unused portion must be transferred by the surviving spouse’s executor. Additionally, a special tax return must be filed within a period of 9 months. During this time, the surviving spouse is not required to pay estate taxes.
How Can I Optimize My Estate Plan?
If you’re interested in other ways to maximize the amount that you can pass on to your heirs, annual gifting is a great option. In the US an individual can legally gift up to $14,000 per year to another individual, tax-free. However, if you gift more than that sum, it will reduce the amount of your basic lifetime exclusion.
With the help of our experienced estate tax planning attorneys, you can minimize your future estate taxes in a variety of different ways by identifying taxable assets, creating a will or living trust, keeping up to date with federal and state tax law changes and more. Take control of your legacy and give the greatest gift possible to your loved ones with guidance from France Law Firm. Visit our team online today for more information on the benefits of preparing for the future with estate taxation planning.