While many people will not trigger the federal estate tax, those with substantial wealth should consider working with an estate planning lawyer to help create a strategy.
There are ways to keep the planning simple and avoid the threshold to minimize estate taxes. However, for those who will trigger beyond this number, setting up trusts is one of the best ways to maintain control over these assets while reducing the tax burden. You may choose to use something known as an intentionally defective grantor trust. This form of irrevocable trust allows the creator to isolate particular assets to separate income tax from estate tax treatment on those assets in the future.
The creator of the trust then pays income taxes on any revenue generated by the assets, but those assets are eligible to grow tax free, which helps to reduce gift taxation on the beneficiaries named. You can also reduce estate taxes if you use a life insurance policy properly. Individually, life insurance proceeds are income tax free at the federal level when paid out to your beneficiary, but if those proceeds get included as part of your taxable estate, this could trigger your estate going over the cut off. Set aside time to work with a qualified estate planning attorney to discuss your next steps and best options for planning for your future.
If you’re unsure how your estate plan lines up with tax strategies, now is a good opportunity to work with a Pasadena estate planning lawyer of your next best steps.
