Have Your Assets Grown? Minimize Taxes by Updating Your Estate Plan

Over time, changing life circumstances may create a need to modify your estate plan. One such example is where your assets grow significantly. In 2015, estates valued at more than $5.45 million may be subject to a federal estate tax. If your assets have grown so that they are at or near this amount, it is important to consider an update to your estate plan in order to minimize your estate’s potential tax burden.

5 Options for Modifying Your Estate Plan to Minimize Estate Taxes

What can be done to help reduce federal estate tax liability? The following are five examples:

  1. Consider incorporating a credit shelter trust into your estate plan if you’re married. This type of trust is designed to take advantage of the estate tax exemption allowed for both spouses. In some cases, this type of trust may be unnecessary if you feel comfortable relying on something known as “portability.” This concept is a recent addition to the estate tax laws that allows the surviving spouse to make an election when the first spouse dies in order to preserve that spouse’s estate tax exemption. There are pros and cons to relying on portability versus creating a credit shelter trust. Your attorney can help you determine which option is right for you.
  2. Consider making annual gifts to your loved ones. Each year, you are entitled to make gifts of no more than $14,000 to each individual. While gifts of this size may not make an immediate impact on the overall size of your estate, over time the amounts can quickly add up.
  3. Consider paying certain expenses, such as medical costs, tuition, or education-related expenses, on behalf of your loved ones. If these expenses are paid directly to the facility or institution, they can typically be made without incurring gift tax.
  4. Consider creating a trust designed for making gifts to charity.
  5. Consider creating an irrevocable trust in order to hold a life insurance policy. If set up properly, this type of trust can help keep the proceeds of the policy outside of your estate.

There may be various other options available to you as well. It is important to consult with an experienced attorney in order to gain a better understanding of your options. We encourage you to contact us today at (714) 459-5481 for more information.