When you pass away, the federal government can tax your estate if it is large enough. Understandably, most people would rather leave their money and assets behind for loved ones. Fortunately, there are legal ways to reduce how much you can owe in estate taxes. The Washtenaw County asset preservation attorneys can help you find an estate plan that helps you lower your tax liability and pass on more to your beneficiaries.
How Can Trusts Reduce My Estate Taxes?
There are multiple ways to use trusts to lower your eventual bill for estate taxes. You can use:
Charitable trusts: Do you currently like to use your money to support good causes? With a charitable trust you can continue to use your money to make charitable gifts while you are alive and after you have passed away. If you give enough away to charity, you could noticeably shrink the size of your estate.
Marital trusts: You and your spouse can make use of your maximum estate tax exemptions and use a marital trust to stow away assets. These can be passed down to your spouse when you pass away, and then they can be passed down to beneficiaries.
Life insurance trusts: You can also put your life insurance policies into a trust. This may seem strange, but if you set up the trust in the right way you can distribute the maximum amount of assets to your heirs while reducing any tax burden they would face.
Can Giving Gifts Now Reduce the Future Bill for Estate Taxes?
As we mentioned, giving charitable gifts can have some tax benefits, but did you know that giving personal gifts can also help you lower your potential estate tax liability? You can give away a certain amount of money to individuals each year and neither of you has to worry about gift taxes.
The annual limit is now $13,000. So if you give a loved one that much money, there is no tax burden to consider. Your spouse has the same limit, so you could actually gift $26,000 to one person per year. If you take some steps to spread the wealth around each year, you could reduce your estate tax liability significantly.
Can I Transfer More Assets to My Spouse?
You can make gifts to your spouse and transfer assets to them while you are still alive. This mostly just helps you to put off any potential estate taxes that need to be paid instead of helping you avoid them entirely.
Talk to Our Estate Planning Lawyers
When you are ready to make an estate plan of your own, contact Collis, Griffor & Hendra. Our experienced estate planning lawyers will help you leave behind as much as you can for your loved ones.