One of the biggest unwelcome surprises your heirs may face is the amount of estate taxes they must pay to the federal government. While most estates do fall beneath the threshold for estate taxes and are, therefore, exempt, that may not be the case with yours if you have a large amount of assets. If you do, there are a few things you can do to minimize the amount of estate tax your family will have to pay.
Trusts have a number of benefits, including tax benefits. By placing some of your assets in trusts, your heirs can make use of them without paying as much estate tax. In some cases, the trust may even eliminate all of the estate taxes on the assets they hold. Trusts have a number of other benefits as well, making them well worth your time to learn about and consider using. For example, you could create a trust that is specifically for your grandchildren to use for college. You could also leave behind a trust for a disabled child that pays out a specific amount every month so they always have some income.
You can leave trusts to others outside of your family, too. One way of reducing your estate tax burden is to create a charitable trust. By leaving assets to a tax-exempt charity, you lower the overall value of your estate. This could put you under the limit for being taxed. The charity, because it is tax-exempt, wouldn’t have to pay taxes on the assets in the trust, either. You can also use trusts to reduce your overall capital gains tax and other taxes.
Spend Your Money
Of course, the easiest way of ensuring your estate is exempt from estate taxes is to spend some of your assets. This lowers the overall value of your estate, so you may be able to get it under the taxation threshold. One thing to keep in mind, however, is to make certain you’re not spending too much. You still need to ensure you have enough assets to live comfortably through your golden years. You may have plans to travel or purchase a vacation home, and you want to be able to do so without worrying about money.
Need help creating a trust or otherwise protecting your heirs from a high estate tax burden? The team at Bell & Shah Lawcan help. Contact us today to schedule a consultation.