Estate planning allows you to make decisions in advance regarding the distribution or handling of your estate in the event of your death. Because estate administration can be complex and your property or financial assets may be subject to an estate tax that affects your beneficiaries, it is beneficial to work with an attorney in Livermore during the estate planning process. Your lawyer’s knowledge of inheritance laws and taxes will ensure that the greatest possible percentage of your assets is passed on to your chosen recipients.
Understanding the Applicable Taxes
Certain taxes may apply to your estate when it is transferred. The estate tax is a federal tax imposed on your ability to transfer wealth to your chosen recipients. This tax applies to all your belongings and assets at the time of your death and is paid from your estate before the remainder is distributed per your estate planning documentation. Alternatively, the inheritance tax affects a beneficiary’s right to receive wealth. Inheritance tax is only imposed by certain states, and several exemptions are possible to minimize or eliminate the need to pay this tax.
How Estate Tax Works
The estate tax is calculated based on the number of assets you own that is greater than a maximum exemption amount, which is set by Congress and may be subject to change. The net value of your estate is calculated by summing your assets, including your home, your bank accounts, your personal property, and your investments, then subtracting any debts. If the value of your estate is greater than the exemption amount, the remainder will be subject to estate tax.
Reducing Estate Tax
Your attorney can help you with estate administration to minimize or even eliminate the amount of estate tax owed at the time of your death. There are several ways to reduce estate taxes, including filing for spousal estate tax exemption, removing assets from your estate via spending, donation, or property transfer before your death, and setting up a life insurance trust. Your lawyer will assess your estate and your desires to help you determine the best way to avoid estate taxation.