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Estate planning: Consider the impact of estate taxes

When you are creating your estate plan, there are many things you have to think about. One of these is how you will be able to pass along as much of your estate to your loved ones when you pass away. This means that you need to consider your debts, but it also means that you need to think about estate taxes.

Not all estates are subjected to taxes, but the ones that are have a hefty chunk taken out of them. You should sit down with your estate and determine if your loved ones are going to have to pay the estate tax.

There are three types of actions that are commonly used to reduce estate taxes. One of these is to place the assets in a trust. Not just any trust will do. Before you get the trust going, you need to think about the purpose of the trust to ensure you are doing the right thing.

Another possibility is giving gifts to friends, loved ones and charities. There are annual limits on this option. You can only give up to a specific amount per person per year. Make sure that you are complying with this law so that your loved ones aren't left with having to pay a gift tax on what you give them. In most cases, this limit is $12,000 per person.

You might also consider marital transfers. These can be rather complex and only apply if both spouses are citizens of the U.S. You should note that this option isn't going to reduce the overall taxes. Instead, it merely pushes the estate taxes off so that they might not have to be paid right at the time of your death.

Source: FindLaw, "10 Ways to Reduce Estate Taxes," accessed April 06, 2018

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