Realistically speaking, working hard for your family’s future is one of the best things you can do during your lifetime.
For instance, if you own a small business, have a couple of cars, a beautiful house, and savings accounts and investments, you’ll surely want these assets to be inherited by your family members upon your demise.
However, transferring your assets to your heirs and beneficiaries comes with the payment of hefty taxes. This is where the estate tax planning comes to the rescue.
Primarily, an estate tax planning refers to a process of arranging your estate or everything you own and transferring them with as little taxation as possible. The estate may include real estate properties, vehicles, insurance policies, bank accounts, investments, and other valuable possessions.
Thus, if you consider doing an estate tax planning, below are the four reasons why it’s essential for you and your family.
4 Reasons Why Estate Tax Planning Is Essential
1# Helps Reduce The Payment Of Estate Taxes
First and foremost, it’s important to know what estate taxes are. Typically, an estate tax is a levy placed on an estate whose overall value exceeds the minimum tax threshold set by law.
It’s also a tax on the right of the deceased person to transfer their estate to their legal heirs and beneficiaries upon their death. However, payment of estate taxes can be financially draining for your family as it may diminish the overall value of the estate.
Hence, if you want to minimize the payment of estate taxes once your estate is distributed, you should have an estate tax plan in place to help you. For instance, estate tax planning is a must if you plan on having a large estate upon your death.
This means that while it’s easy to forget all of your financial affairs while you’re alive, especially the taxes and financial details, you should have your estate taxes planned out and prepared in advance of your passing.
Thankfully, with the use of different estate tax planning strategies, you can save your family from paying expensive estate taxes to the government. Not only that, but by having as little taxation as possible, you can preserve the portion of your estate to your lawful heirs and beneficiaries.
The following are the effective strategies to minimize estate tax liability:
- Grantor retained annuity trust
- Irrevocable life insurance trusts
- Individual retirement accounts for tax-reduced charitable giving
- Qualified terminable interest property (QTIP) trusts
- Wealth transfer during your lifetime to reduce gift taxes on the estate
On the other hand, if you want a happy ending when it comes to estate taxes, it’s important to consult an estate planning lawyer who specializes in tax law.
They can help you with planning your estate and making sure that all of your financial obligations, including the estate taxes, are well taken care of after you’ve passed away.
However, if you’re looking for an in-depth explanation of how estate planning and the professionals behind it work, click here to get more information.
2# Helps Avoid Family Mess
With the expensive estate taxes on top of the estate, there’s a possibility of your family fighting over the assets and their respective contributions to taxation after you die. Whether you believe it or not, it happens more often, especially if you lack estate tax planning.
Without a plan in place, the transfer and distribution of your estate can be a cause of family turmoil. When this happens, serious disagreements regarding the payment of estate taxes and other related issues may break the family you’ve taken care of for so many years.
This is one reason why estate tax planning is essential. The strategies involved in this process can be beneficial in making sure your heirs and beneficiaries will no longer pay a large amount of money for the taxes.
Instead, they’ll get what they should get without deductions for taxation purposes. After all, this is something you’ll certainly want to happen following your demise.
3# Helps Keep Your Assets Safe
If you own an estate, you probably know the need for estate tax planning. It can help keep assets safe from potential problems. It can prevent taxes from being assessed against assets you never had to pay out and can keep your creditors happy by making sure they can still collect what’s due.
Also, even though your assets can really become taxable once you die, it’s not something you need to worry about if you have an estate tax plan in place.
For instance, you can take advantage of the strategies involved in estate tax planning to plan for the taxes and get your assets in order without having to pay large amounts of money for tax liabilities.
4# Allows You To Have Peace Of Mind
Estate tax planning gives you peace of mind because it allows you to become more prepared for whatever that may happen. Since the estate tax law can be complex and complicated, there’s always the risk that you could lose a lot of money. You don’t need to worry about this if you have an estate tax plan in place.
Generally, estate tax planning is one way to make sure that you have your financial needs taken care of before your death so you’ll not feel like you did nothing to secure the future of your family.
As such, it gives you a better level of peace of mind that whatever may happen to you, you can rest, knowing your family will have a good financial future even if you’re already gone.
With several millions of estates being distributed each year, it’s important to know why estate tax planning is necessary in order to protect your family and assets from the estate taxes.
Ideally, a good estate tax plan can help you save thousands of dollars on your taxes and can assure you that your loved ones will have a good quality of life even after you pass away.
Therefore, if you need help in figuring out how to make an estate tax plan, you can hire an estate planning attorney to help with everything from estate planning to the legal intricacies involved.
Lastly, a good attorney can also help you determine if your state has specific requirements in place to ensure your compliance.