Estate planning is a bit different for each person, depending on their family structure, their financial situation, their health, their long-term financial goals, and other factors. One of the reasons why it is so important to work with an experienced attorney is that an attorney is able to look at these various factors and help identify strategies, steps, documents and other tools to achieve those goals.
One factor that should always be considered when doing estate planning is taxes. Of particular importance for couples of modest wealth is estate tax. Those who have been following the changes in estate taxation in recent years know that the estate tax exemption amount is the largest it has ever been.
At 5.49 million in 2017, many Americans will not have to worry about paying estate tax. For those whose wealth exceeds or nears that amount, however, proper planning is important to ensure the estate is not unduly burdened with tax expenses. The top tax rate for estate tax has been at 40 percent for the last several years.
In cases where no planning is done and estate is due, heirs may have to end up liquidating parts of the estate to pay off estate tax due to the IRS. Planning in advance for coverage of those costs can prevent this. One way to do this is by taking out a life insurance policy dedicated to funding the payment of estate taxes after one’s death. Another option to avoid problems is to take advantage of lifetime gifting to ensure the estate is below the exemption amount at one’s death.
In our next post, we’ll look at the changes that might be coming to the estate tax under President Trump, and how an experienced estate planning attorney can help protect an estate from burdensome estate taxes.
Source: IRS.gov, Estate Tax, Accessed Feb. 13, 2017.