After your death, all the assets you own will be subjected to estate taxes if they exceed a certain value. The taxes are not usually favorable to your descendants, and you must try your best to minimize them while you’re still alive. If you don’t know, then this article will help you understand how you can protect your estate from excess taxes.
Gift Your Assets
Giving out your assets as gifts is the best way that has worked for many people seeking to reduce their estate taxes. The sooner you start giving your kids parts of your estate, the better it will work in your favor. According to GRF CPAs & Advisors, gifting parts of your estate reduces their value, and this means minimizing or getting rid of the taxes altogether. You can give your children part of the estates annually to make the whole process easier. Giving some of your wealth to charity organizations also works well to reduce the estate size.
Set Up a Trust
According to Jacoby & Meyers, trusts let your beneficiaries avoid the lengthy and costly probate court process after your death. Some people shy away from this because it involves handing over your estates to another person. However, if you have someone in your family that you can trust with your estates, then you don’t need to worry about this. You can hand over the assets either to your spouse or child. The best way to do this is to contact a law firm in order to help you determine the different kinds of trusts available and how they work. The good thing about a trust is that your assets are protected from misuse, creditors, or any other person you don’t want near them, including your spouse. You must, however, understand that irrevocable life insurance trust will not be adjustable without the consent of the trustee.
Family Limited Partnership
Family limited partnerships mostly work in family-owned businesses that you may want your family members to inherit after your death. You can do this by setting up a general partnership with the members of your family or heirs as partners. With your family members as your partners, it means you have different ownership, thereby reducing the value of your assets. You will still be the sole owner, but the assets won’t be taxable when you die because the value you own as a partner won’t be enough.
Taking caution about the magnitude of your estate taxes is a prudent move. Reducing estate taxes is all about fighting to retain what you’ve worked hard for and ensuring they are used appropriately. You, therefore, need to make sure the state doesn’t charge too much on the taxes for your estates.
If you need help with your financial planning needs, get in touch with us today at (860) 606-0977 to see how we can help you.