7 Ways to Minimize Estate Taxes
The US has 38 states with no state-imposed estate tax, one of which is Florida. Even though some states do not have an estate tax, there is still a federal estate tax that everyone in the United States must pay. The good news is that there are ways to minimize these estate taxes so your family and friends can maximize the wealth you leave behind.
A No State-Imposed Estate Tax Caveat
If you are a resident of Florida, for example, and you die while owning property in a different state, your family may have to pay estate taxes in that other state in addition to the federal estate tax. Federal estate taxes must always be paid, regardless of the state of the decedent (deceased person) or where the asset is located.
Ways to Minimize Estate Taxes
There are several ways you can legally reduce your federal estate taxes. It is recommended that you consult with an estate planning or probate attorney, like those at Easy Estate Probate, to effectively minimize the cost of estate taxes after your passing.
Here are some ways you can minimize estate taxes in your estate plan:
1. A Life Insurance Trust
The proceeds of your life insurance normally become part of your estate after you die, which would make it subject to federal taxation. Instead of having your beneficiary pay taxes, you can create an irrevocable life insurance trust and then transfer the ownership to your desired beneficiary.
2. Qualified Personal Residence Trust
Setting up a qualified personal residence trust (QPRT) is an excellent way to reduce the number of assets in your estate subject to federal estate tax. A property put into a QPRT could allow its value to be frozen, thus bypassing gift taxes and reducing the size of your estate. If you die before the term of this trust ends, then the property will still be part of your taxable estate. It’s recommended that you consult with an attorney experienced in tax planning to ensure that your trust works for you and your family – Easy Estate Probate can help.
3. Gifting of Assets
One of the easiest ways of saving on estate taxes is to gift your assets to your friends and family while you’re still alive. By doing this, it’s possible to avoid taxes altogether, but there are still federal gift taxes to consider. Since federal annual and lifetime allowances are fairly high, gift taxes wouldn’t apply in most cases.
4. Charitable Donations
It is possible to transfer part of your estate to a charity via a trust. There are two main types of charitable trusts: a Charitable Lead Trust (CLT) and a Charitable Remainder Trust (CRT). If you would like to know the difference between the two and which would work best for you, consult with an experienced estate planning attorney like those at Easy Estate Probate.
5. Family-Limited Partnership
Having partners with a stake in your business or sharing ownership of your assets reduces the size of your estate and can allow your friends and family to gain ownership after your death. It is recommended that you speak to an experienced estate planning attorney in order to set up a company with a family limited partnership.
At Easy Estate Probate, we can help you set up and execute an estate plan that will maximize the legacy you leave behind for your friends and family. Click here to get a FREE case review today.