Estate planning is a complicated process. Consulting a lawyer regarding estate planning is the best strategy for ensuring that your beneficiaries are well taken care of and that your final wishes are carried out. Your lawyer in Tracy at Bakeirnk, McCusker & Belden can offer guidance regarding minimizing your heirs’ tax burden and ensuring that certain funds support your preferred purpose, among other estate planning strategies.
Consider Creating a Trust
You probably already know that you can be as specific as you wish in your will. You can choose to pass on your collection of vintage bottles to your favorite niece, for example, or to give your nephew your car. However, when you designate assets to beneficiaries in your will , you cannot control how your beneficiaries will choose to spend those assets. If you have particularly young beneficiaries who may not necessarily be given to making sound financial decisions, your lawyer may recommend that you create a trust. You can choose to create a trust with funds that are earmarked specifically for your child’s college expenses, for example. You can designate a trustee to administer these assets after your passing. Your trustee will be legally required to make sure that your assets are only used in the manner in which you intended.
Employ Tax Minimization Strategies
By consulting a lawyer with regard to estate planning, you can develop strategies to minimize the tax burden for your beneficiaries. Estate and income tax can significantly reduce the amount that your heirs will receive after your passing. You can ensure that they are taken care of by designating tax-free funds to your heirs and leaving taxable assets to charities, if you wish. An example of a tax-free account is a Roth retirement account.
Purchase Life Insurance
Another way to reduce your heirs’ income tax and estate tax burden is by purchasing life insurance. Life insurance is not taxable on the state or federal level. This means that your estate would receive the full amount of life insurance. If your lawyer estimates that your beneficiaries might be required to pay $300,000 in taxes, for example, you could purchase a life insurance policy for that full amount to eliminate their tax burden.