Two things are certain in life: death and taxes. While you cannot avoid either, you can minimize the taxes your estate will owe after you are gone. However, it means looking beyond traditional estate planning approaches.
Below are some strategies that can help reduce estate taxes and preserve more of your wealth for your heirs.
Establishing trusts
Estate taxes are based on the size of your estate. Trusts help minimize death taxes by reducing your taxable estate. When you create an irrevocable trust and transfer assets to it, they are no longer considered part of your estate, potentially lowering your estate tax liability.
Gifting or transferring assets during your lifetime
You can also reduce the size of your taxable estate by regularly gifting assets to loved ones during your lifetime. However, this requires careful planning to avoid triggering gift taxes. As long as you are within the legal thresholds of lifetime gifts and estate tax exemptions, gifting assets can significantly minimize estate taxes.
Similarly, transferring assets to your spouse can help minimize estate taxes. However, it’s only temporary since the assets will be considered part of the surviving spouse’s taxable estate upon their death.
Joint ownership of assets
When you jointly hold assets with the right of survivorship, their ownership automatically transfers to them when you die. This can reduce the size of your taxable estate, although it helps to consider the implications of joint ownership, like income taxes and your level of control over the assets.
Navigating these and other estate planning strategies to minimize your estate taxes can be challenging due to the potential pitfalls. You do not want to do anything that could prove costly to your estate, expose you to legal issues with the IRS or derail your plans. Reaching out for legal guidance can help you do everything right and save your estate a fortune.
