Taxes are something you have to pay all of your life, and if you do not plan ahead, they will be something your estates will be paying even after you are gone. So making sure that you get quality estate planning tax advice when you are arranging your final affairs is one way to ensure that your heirs, and not the IRS, receive the bulk of your estate.
While it may be trite to observe that no two individuals are the same, it is not a clich to say that everyone of us can benefit from estate planning tax advice, if only to learn that we will not have to worry because our estates will not be large enough that a tax is applicable. The estates of those just beginning their careers may not require a lot of estate planning tax avoidance measures, while the estates of their grandparents very well might.
Saving Taxes - People have heard this phrase over and over again in newspaper ads inviting people to public seminars put on by a "national expert" that nobody has ever really heard of. But, how does a Trust really help to save taxes? Under today's tax laws, a common Revocable Trust does not save taxes for most people. First, a Trust doesn't save any income taxes. The Trust is ignored for income tax purposes and all of the income generated by the Trust is taxed to the individual Grantors of the Trust as usual. Also, for a single person, a Trust does not save any estate taxes. But, for a married couple, a Trust can save estate taxes. Most married couples have a Revocable Trust, that splits into an "A" and a "B" trust at the death of the first spouse. The primary reason for this split is that it guarantees that the couple will get two exemptions to apply against the estate tax. One exemption for the "B" trust when the first spouse dies, and then a second exemption against the "A" trust when the surviving spouse passes. Without an A/B trust, it is possible that the exemption of the first spouse could be wasted. But, since the federal estate tax exemption is now set at $5 million, most couples only need one exemption anyway. So, in the end, for probably 95% of married couples, having a trust will not save any estate taxes. Now, this is true as to the Revocable living trust. Don't confuse this with the 4 or 5 other "specialty trusts" that have the specific purpose of saving estate taxes. Examples of a "specialty trust" would be an Irrevocable Life Insurance Trust (designed to keep life insurance out of the estate tax system) and a Qualified Personal Residence Trust (designed to keep the primary and vacation residences out of the estate tax system).
Restrictions and Incentives for Spouse - A well drafted Trust should contain provisions as to what happens to the assets of the first spouse to die, if the surviving spouse remarries. Most clients want to adequately provide for their spouse, but they don't want to provide for their spouse's new husband or wife. Also, to what extent can the surviving spouse change the estate plan, after the death of the first spouse, to disinherit the children. My experience is that most spouses tend to remarry, and most of the time, that new spouse will also have children. Now, we end up with a "blended family". Over time, the surviving spouse feels love and loyalty to the new spouse, and perhaps the new stepchildren. We probably all agree that the surviving spouse should be able to do what they wish with respect to their community property half interest in the asses. The more difficult question is whether the surviving spouse can also control the ultimate disposition of the deceased spouse's community property half of the trust and make provisions for the new spouse or the new stepchildren out of the deceased spouses's half of the trust.
A significant portion of your assets might be vulnerable to estate taxes after you die. However, there are ways to leave behind an estate without losing most of it to taxes. It is important that you consult with a qualified attorney to discuss the most strategic methods for establishing your unique plan. A well-crafted plan will ensure that your beneficiaries get the most benefit from your years of hard work.
While such a scenario may be rare, estate planning tax advice is not under the oversight of any specific government authority. So the quality of advice you get will depend to a great degree on the experience of you advisor, be it an attorney, accountant, banker, or financial planner. By using an estate planning guide to familiarize yourself with your options so that you know what questions to ask, you will have a much better chance of finding a trustworthy professional to provide your estate planning tax advice.
While it may be trite to observe that no two individuals are the same, it is not a clich to say that everyone of us can benefit from estate planning tax advice, if only to learn that we will not have to worry because our estates will not be large enough that a tax is applicable. The estates of those just beginning their careers may not require a lot of estate planning tax avoidance measures, while the estates of their grandparents very well might.
Saving Taxes - People have heard this phrase over and over again in newspaper ads inviting people to public seminars put on by a "national expert" that nobody has ever really heard of. But, how does a Trust really help to save taxes? Under today's tax laws, a common Revocable Trust does not save taxes for most people. First, a Trust doesn't save any income taxes. The Trust is ignored for income tax purposes and all of the income generated by the Trust is taxed to the individual Grantors of the Trust as usual. Also, for a single person, a Trust does not save any estate taxes. But, for a married couple, a Trust can save estate taxes. Most married couples have a Revocable Trust, that splits into an "A" and a "B" trust at the death of the first spouse. The primary reason for this split is that it guarantees that the couple will get two exemptions to apply against the estate tax. One exemption for the "B" trust when the first spouse dies, and then a second exemption against the "A" trust when the surviving spouse passes. Without an A/B trust, it is possible that the exemption of the first spouse could be wasted. But, since the federal estate tax exemption is now set at $5 million, most couples only need one exemption anyway. So, in the end, for probably 95% of married couples, having a trust will not save any estate taxes. Now, this is true as to the Revocable living trust. Don't confuse this with the 4 or 5 other "specialty trusts" that have the specific purpose of saving estate taxes. Examples of a "specialty trust" would be an Irrevocable Life Insurance Trust (designed to keep life insurance out of the estate tax system) and a Qualified Personal Residence Trust (designed to keep the primary and vacation residences out of the estate tax system).
Restrictions and Incentives for Spouse - A well drafted Trust should contain provisions as to what happens to the assets of the first spouse to die, if the surviving spouse remarries. Most clients want to adequately provide for their spouse, but they don't want to provide for their spouse's new husband or wife. Also, to what extent can the surviving spouse change the estate plan, after the death of the first spouse, to disinherit the children. My experience is that most spouses tend to remarry, and most of the time, that new spouse will also have children. Now, we end up with a "blended family". Over time, the surviving spouse feels love and loyalty to the new spouse, and perhaps the new stepchildren. We probably all agree that the surviving spouse should be able to do what they wish with respect to their community property half interest in the asses. The more difficult question is whether the surviving spouse can also control the ultimate disposition of the deceased spouse's community property half of the trust and make provisions for the new spouse or the new stepchildren out of the deceased spouses's half of the trust.
A significant portion of your assets might be vulnerable to estate taxes after you die. However, there are ways to leave behind an estate without losing most of it to taxes. It is important that you consult with a qualified attorney to discuss the most strategic methods for establishing your unique plan. A well-crafted plan will ensure that your beneficiaries get the most benefit from your years of hard work.
While such a scenario may be rare, estate planning tax advice is not under the oversight of any specific government authority. So the quality of advice you get will depend to a great degree on the experience of you advisor, be it an attorney, accountant, banker, or financial planner. By using an estate planning guide to familiarize yourself with your options so that you know what questions to ask, you will have a much better chance of finding a trustworthy professional to provide your estate planning tax advice.
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Frank Miller has a Debt Consolidation Blog & Finance, these are some of the articles: Benefits Of Investing In Loose Diamonds You have full permission to reprint this article provided this box is kept unchanged.
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