People who pay their taxes should do proper tax planning as early as possible. You do more than just consider deductions of your annual taxes when you do tax planning. For your assets, you also need to find ways to minimize the taxes you pay for them. You refer to taxes pertaining to your assets as estate tax. To minimize estate taxes, you must make sure to use effective estate planning strategies.
Estate planning is all about planning for your future and what may lie ahead. People who are not comfortable talking about death and thinking about dying often set aside this important process of their lives. Furthermore, some people are just not sure how much estate taxes will have an effect on their estate.
When it comes to estate, this covers your home, all pension plans, personal investments, annuities, and insurance. You should expect to pay estate taxes for your estate with a value of over $2 million. This is one of the reasons why you should invest your time and effort in estate planning.
There are different estate planning strategies that your lawyer or accountant will look into. Below are some common estate planning strategies used these days.
Credit shelter trust is one estate planning strategy that makes you save on your estate taxes. For this option, your spouse will not pay any of your taxes anymore when you die. This tax benefit applies the same for the second spouse once they die and leave all assets to their heirs. With credit shelter trust, you can put all $2 million worth of your assets to it to ensure that your heirs and spouse can benefit from it.
Gifting is another estate planning strategy. You may decrease your estate taxes by gifting as long as they are within certain annual limits. For example, you can gift $12,000 each year to each person without paying for any gift taxes. You can do this while you are still alive. Do this annually for your estate value to decrease by the time that you eventually leave this world.
Finally, a last estate planning approach you can take is insurance for liquidity. Even if this tax planning strategy does not eliminate your estate taxes, it helps in reducing it. So, this plan helps you find ways to enable your heirs to pay your estate taxes nine months after you die. Your heirs can pay for your taxes with the help of life insurance where death benefit is big enough to pay for your taxes.
Whichever estate planning strategy you go for, you need to speak with an estate planning expert that can help you navigate your way through the legal complexities of estate plans. You also need to start making estate plans now if you want what is best for you, your assets, and the people you leave behind.