Are you planning to divide your property equally so that your partner or family can access them when you expire? Perhaps, you are still wondering what to do in the event of your sudden demise. Through estate planning, your family can easily inherit your wealth, after your death, without having to run around for paperwork and, more importantly, before the taxman comes knocking on your door.
Through this post, you will find out why estate planning is so important, how your family can benefit through estate planning, and a few ways to protect your inheritance from being taxed by the authorities.
Reasons Estate Planning Is So Important
For many Americans, estate planning does not seem like a fun thing to do. Of course, it is not the same as booking seats for a movie or restaurant. After all, you worked hard for it, and it is your money. Leaving it behind is not an easy thing to plan for. It takes a lot of thought and planning
Your Beneficiaries Are Protected
You do not have to be very rich to pass on your wealth. It could be a small property or apartment even. Once you are gone, you cannot control who receives it after that. Through this kind of planning, you are designating the rightful heir to your wealth.
If you have not written your will or made a decision about who gets your property after your death, then the federal court makes a ruling and probate court gets involved. It can take several months and you need to pay hefty lawyer fees. There can be adverse outcomes for your family members if the ruling is not in their favor.
You are protecting your kids with estate planning
Protect your kids because, at times, your future is uncertain. You never know when you might get the call from above. Hence, it is always good to be prepared. If parents die before kids reach 18 years of age and local guardians are not mentioned in the will, it becomes a complicated case. The federal court will make the final ruling. You can name guardians for your kids in case parents die before they are 18 years of age.
It helps in saving inheritance tax
The main aim of estate planning is to protect your loved ones as well as save them from the hassle of paying inheritance taxes. The IRS or the Internal Revenue Service seems always to get a whiff of death in the family, and show up at your door before you know it.
How Your Family Can Benefit Through Estate Planning?
Your family can benefit through estate planning in different ways. Having a will can help to avoid complicated things that can be avoided like paperwork, court work. lawyer fees, and so on.
Ways to Protect Your Inheritance from Taxes
Think of the alternate valuation date. The market value of your descendant’s property at the time of the breadwinner is usually the same. Real estate rates in America do not dynamically change unless you are in a prime area like San Francisco. So, have the alternate valuation date ready because the amount given is often more. The property should be disposed of within 6 months from death.
Put most of the money into a trust
Having most of the inheritance in a trust works well for the heirs. That is because it lets you give your assets away without the probate (establishing the validity of a will). The expenses of the probate are bypassed in this way.
Placing your assets into a trust does not make it a part of your estate when you die and hence inheritance tax is avoided. For example, you can form a trust where your children can have access once they become 18 years or adults. Your assets can earn you interest too. The income is deemed taxable for income tax, but no inheritance tax upon death.
You should minimize retirement account distributions
The assets that are inherited become taxed only when they are distributed. Usually, the spouse or partner of the dead is entitled to the entire property. However, when you are inheriting property from somebody else, who is not your partner, then the money has to be transferred to an IRA account in your name.
Give some of the inheritance to charity
You can give away some money to charity by forming a charitable trust. This ensures that you can give away some money to a cause you believe in and not towards federal taxes. You can work for fellow humans while saving taxes for your heirs.
The main thing to know is that estate planning is not meant only for the rich. As long as you have some money or property taking care of everything beforehand can have long-lasting positive effects on your family.
The best way to be on the safe side is to communicate and talk with estate planning agents. This way, you are enlightened on the state and federal taxes, and to find out ways to reduce your beneficiary’s inheritance taxes.