You may have heard the Benjamin Franklin quote, “In this world nothing can be said to be certain, except death and taxes.” While death and taxes may be certain, the amount you may pay in taxes is not. With some strategy and proper planning, you can leverage your assets to pass on a greater financial legacy to your loved ones. This article will discuss a few of the ways that you can minimize your taxable estate.
The IRS will want to review your estate at death to see if you owe them that one final tax: the federal estate tax. Whether there will be any tax to pay depends on the size of your estate and how your estate plan works. There are many effective strategies that can be implemented to reduce or eliminate death taxes, but you must start the planning process early in order to implement many of these plans.
One way that you can minimize your taxable estate is through the use of certain trusts, such as life insurance trusts, gifting trusts or charitable trusts. These trusts can also give your beneficiaries the additional benefits of asset and divorce protection. You can also decrease your taxable estate by making outright gifts during your lifetime. These gifts will have to stay within a certain amount per year, per person based on the current law ($14,000 per year, per person in 2015) in order not to count against your lifetime exemption amounts. Using trusts or a gifting strategy will protect your estate and maximize the amount you can give to your loved ones, rather than being counted towards the taxable amount in your estate.
There are many different tools that can be used to effectively minimize your taxable estate. One key thing to keep in mind is to be sure to consult an attorney and financial professional to make sure your matters are handled properly and that you are using the best strategy for your particular situation.