If you combine the total amount of your assets and it surpasses the current government regulated dollar mark, you may want to look into finding ways to reduce the taxes implemented on your estate. Everyone wants to save money and minimizing taxes on what you own is a great way to accomplish this. There are several techniques you can use to legitimately plan and reduce these imposed taxes. This list includes a handful of the methods you can think about using. There are other methods as well but a professional estate attorney will be better skilled to direct you towards further tax minimization tactics. Seeking the help of an experienced estate planning attorney is advised since they will be able to assess your personal situation and help you make decisions as to which techniques will benefit you and your family the best.
Methods for Reducing Taxes
â€¢ Transfer to minors- This is gifting to a minor through a custodian. The minor is not given the money until he/she reaches a specific age.
â€¢ Lifetime gifting to children and grandchildren- A maximum of twelve thousand dollars can be gifted each year per spouse, per individual receiving the gift. Usually people choose to gift to children and grandchildren to help with education or other life courses embarked on. These do not incur a gift tax. This method is effective since over time the transferred money can be a significant amount and can quickly become a way to reduce your estate.
â€¢ AB Trusts- A trust that ensures the maximum allowed personal exemption. It also allows the remaining spouse to make use of the assets left behind by the deceased spouse.
â€¢ QTIP Trust- A popular trust for people who have children from a previous marriage that they would like to include in receiving assts once they are deceased. This trust allows an asset transfer to their spouse while still having the final say in where it goes once their spouse is deceased.
â€¢ Irrevocable Life Insurance Trust- Transferring the allowed amount of estate to an insurance trust moves money outside of the estate to another type of asset that is usually not taxed. This not only reduces the taxable estate amount, but helps increase your life insurance savings.
â€¢ Lifetime charitable transfers passed along after death reduces estate and therefore taxes imposed upon it. They have the secondary perk of passing along an income tax deduction. They can also be arranged so that the donor can still use the gifted funds until their passing.
4. Private Annuity- This is the sale of a particular asset to a younger member of the family. That family member then gives an unsecured promise to pay a yearly payment to you- the seller. The sold piece of estate is then no longer part of your estate. Payments will however become part of your assets unless they are spent.
There are a variety of other ways to diversify and distribute your estate in order to minimize taxes while maximizing the usefulness of your assets. A trained professional estate attorney with experience in this process will be able to assess your personal situation in order to suggest which methods are best for you and your family.