With the estate tax making a comeback next year, people with taxable estates are once again looking for ways to minimize- or even avoid – their estate tax bill. You’re taxed on the value of assets you have in your “gross estate” at the time of your death, so the way to reduce your tax bill is to reduce the size of your gross estate. Here are the methods for doing that:
- Spend, Spend, Spend. Spending your assets is the obvious choice, and it’s also likely the least attractive. While spending what you have leaves nothing to be taxed when you pass away, it also leaves nothing for you to pass on to your loved ones. Also, unless you have a very large estate, knowing how much you can spend is a difficult balancing act. No one knows how much time they have left, so it’s hard to pinpoint how fast to spend your assets, and still leave enough to support yourself through your final years.
- Give It All Away. Whether you give your property to loved ones or to favorite charities, it’s a more benevolent choice than spending your assets. But, it leaves you with the same basic problem: once you give it away, it’s gone. So, it’s hard to walk the fine line between giving enough away and keeping enough to support yourself.
- Use a Basic Estate Plan. If you’re married, you can incorporate an AB trust into your will or revocable living trust, keeping use of your assets while reducing your estate tax bill. Whether you’re married or single, you can remove your life insurance policy from your gross estate with the use of an Irrevocable Life Insurance Trust.
- Use Advanced Estate Planning. If your estate is substantial, then advanced estate planning tools can help you remove some of your assets from your gross estate, while still enjoying the use of them – or an income stream from them – during your lifetime. For instance, a properly planned and established Qualified Personal Residence Trust can remove your first or second home from your gross estate while still allowing you to live in the home for a specified period of time.
You should not attempt to engage in estate tax planning on your own. A qualified estate planning attorney can help you determine which planning methods are best for you.
Mr. Stephen Mendel is an attorney who focuses a substantial part of his practice on estate planning. Mr. Mendel’s guiding principle is to provide his clients with quality legal services tailored to each client’s specific needs and goals.
Latest posts by Stephen A. Mendel, Estate Planning Attorney (see all)
- Thought of the Day - September 28, 2022
- Death and Your Digital Footprint - September 21, 2022
- Thought of the Day - September 21, 2022
