Estate Planning Strategies
What is Estate Planning? Estate planning is a term used to describe how your money and assets will transfer after your lifetime.
At the center most folks’ estate plan is a Last Will and Testament and/or a Revocable Living Trust. They are legal documents designed to pass along your instructions after you’ve passed.
Passing away without a Will is called “intestate,” and in that case, the State will step in to settle your affairs. Unfortunately, the intestacy process can be very time-consuming, expensive and cumbersome for the loved ones you leave behind. It is best to have a Will in place to avoid compounding the pain of your loss.
Something we’re passionate about here at Private Client Advisory, Inc. is Creative Stewardship and its corollary, Living your Legacy. You can read more about that HERE.
The transfer of assets can trigger different types of taxes: income tax, estate tax, capital gains tax, generation-skipping transfer tax and gift tax. Have you considered how these taxes could affect the amount you’ll leave behind for loved ones? It’s wise to keep up with estate tax laws, because they constantly change. The following are just a few examples of things you ought to consider
Unified Credit … Estates that exceed a certain value (exclusion amount) may be subject to the Federal Estate Tax. But have you heard of the unified credit against estate tax? Basically, this means you can leave an amount that does not exceed the exclusion amount to anyone you choose … federal estate tax free. If you are married, you can leave an unlimited amount to your spouse, tax-free. But … are you using the unified credit to your advantage?
For high net worth couples, a little reorganization can help you attain the utmost value for this credit. Also worth considering could be a credit shelter trust, which can help maximize the value of the unified credit.
If you would like to know the current estate tax exclusion and unified credit amounts, give us a quick call at (770) 297-9000.
Gifting … For those with taxable estates, gifting can be an important tool. While many choose to transfer estates after their death, consider transferring assets while you are alive. Did you know that married couples can gift an unlimited amount to one another, gift tax-free, as provided by the unlimited marital deduction provision in the federal gift tax law? They can also gift a certain amount, gift tax-free, to anyone of their choosing each year. This annual benefit expires if you do not use it in the current year.
There are other ways of tax-free gifting, too … including tuition paid directly to an educational institution or amounts paid to an approved non-profit institution. By taking advantage of these and other gifting options, you could potentially increase the value of what you’re giving while decreasing your taxable estate.
Trusts … A well-written trust could help your heirs to avoid the probate process, thereby potentially saving them money and gaining privacy (probate records are open to the public). Did you know that your heirs may need to file a petition to probate your estate … even if you have a will? However, if a living trust has been prepared and funded properly, your heirs could avoid probate.
You may also want to consider a dynasty trust, which is a long-term trust created to benefit future generations. Dynasty trusts can have huge tax-saving potential (in the long run).
Other areas to consider … Have you thought about charitable remainder trusts? Life insurance replacement? Business succession? Investigating these topics may reveal ways to save taxes and retain more of your hard-earned wealth.
Please note that Private Client Advisory, Inc. is not a law firm or accounting practice. We do not prepare legal documents or tax returns. The SFA does not give tax or legal advice.