Inheritance Tax Planning

Planning for yours or a loved one’s death can be difficult. The fact is that the majority of Americans do not prepare wills or trusts to deal with assets and possessions upon death. Without any planning, those who stand to inherit your possessions may not receive their full share owed.

As the law currently stands, the Estate Tax will be repealed for the year 2010, and then reinstated with a tax-free cap of $1 million for 2011. However, Congressional efforts are being made to restore the current 2009 $3.5 million cap for 2010. Being active with Inheritance Tax Planning can help ensure your loved ones receive the most they can from you.

Tax Implications Depending on the Will and Trust Type

The first, basic area to begin inheritance tax planning is to create a will or trust.  Having a will or trust in place will ensure that whomever you designate to receive cash, assets or personal property will receive that property. A trust can be used to divest yourself of your assets before or at the time of death to avoid being counted in your estate tax calculation. There are various forms of trusts that can enhance and protect your assets, and you should speak with an experienced attorney to determine which is best for you.

Protecting your Heirs from Excessive Taxes

There are many other devices that are subject to taxation upon inheritance, such as life insurance, various stock market holdings (stock, bonds) and various bank notes (CDs, money market accounts, savings, 401ks). While having all of these during your lifetime greatly enhance your life and provide support thru retirement, upon death they can become large assets that accumulate against the exception on the estate tax. A common “trick” in inheritance planning is to give ownership of the life insurance policy to another individual, to prevent that asset from being counted against your exemption.

Can a Tax Attorney Help?

Trying to explain or understand how to plan for estate taxes is no simple matter, evident from this article alone that barely scratches the surface. Contacting an experienced attorney in estate planning can ensure that your assets as protected as possible in various forms of trusts or other planning tools that can prevent them from being unnecessarily taxed and fully maximized. Without planning for any inheritance tax implications, your heirs and beneficiaries may not get to fully enjoy everything you accumulated and wanted them to enjoy.