When planning how to protect and distribute your assets to your loved ones, it is crucial to have a trust attorney by your side. An experienced trust attorney can help you come up with an effective estate plan that will provide asset protection and tax planning for your family when you eventually pass on.
A trust attorney guides various estate planning tools such as wills, trusts and powers of attorney to ensure your assets are distributed according to your wishes. Also, a trust attorney is in the best position to navigate the complex tax laws involved in the estate planning process.
This article will explore some of the key strategies a trust attorney will employ to help you minimize estate taxes. Continue reading to learn more.
- Tax-free vs taxable gifts
One effective strategy to minimize estate taxes is by making a tax-free lifetime gift. You can make tax-free gifts of up to $17,000 per person per year. These gifts are not limited to gift tax or the need to file a gift tax return. Also, certain payments for medical and tuition expenses made directly to healthcare providers or educational institutions can be gifted tax-free.
- Gifts to irrevocable trusts
You can give an irrevocable gift trust to beneficiaries who are not financially responsible enough to receive a large sum of gifts. Gifting assets to an irrevocable trust enables you to remove those assets from your estate, consequently reducing estate taxes. You can give instructions to the beneficiaries on how the trust assets are to be used and you can put a trustee in charge of carrying out the terms of the trust.
- Charitable contributions and charitable trusts
Charitable contributions offer income tax benefits and help to minimize estate taxes. By making charitable gifts while you’re alive, you get to reduce your taxable estate. One effective tool is the Charitable Remainder Trust (CRT). A CRT enables you to find the trust with appreciated assets, avoid capital gains taxes, provide an income stream for you and your family and also receive income tax deductions. After your passing, the remaining trust assets will be passed to charities of your choosing, thereby reducing estate taxes.
- Irrevocable Life Insurance Trust (ILIT)
Life insurance proceeds are usually added to the insured’s gross estate and are subject to estate taxes. An ILIT allows you to transfer or purchase an existing life insurance policy to an irrevocable trust, where the trustees become the owner. ILITs can be an effective tool for transferring wealth across generations because they provide liquidity to pay estate taxes.
- Qualified Personal Residence Trust (QPRT)
A QPRT allows you to transfer a vacation or residence property to beneficiaries while retaining an interest in the property for some time. By leveraging applicable interest rates, the value of the gift is reduced, reducing gift and estate taxes. If you survive the term, the property will no longer be regarded as part of your estate.
Conclusion
Talk to an experienced trust attorney today on how you can minimize estate taxes. At Citadel Law Firm, our lawyers are ready to work with you to ensure your estate plans are in alignment with your goals.
Contact us today to learn more about our services!
