Will you be leaving substantial assets to your heirs? Then you are probably concerned about estate taxes and the bite they'll take out of your multi-million dollar estate. Not to mention state taxes that your heirs may have to pay. Our contributors have a few savvy strategies that can help lower your estate tax burden.
The annual gift exclusion is one of the strategies discussed in The Motley Fool's article, "3 Smart Strategies Designed to Reduce or Eliminate Estate Taxes." This allows you to pass some of your estate on to heirs tax-free every year while you are still living, at the same time it decreases the value of your estate.
Because your home may be your biggest asset, you may want to reduce the amount of estate tax you pay on your home, which will be a money-saver for your family. One strategy uses what's known as a Qualified Personal Residence Trust (or "QPRT"). To use the QPRT, you would transfer your home into a trust and designate the length of the trust and the recipient of your home when the trust ends. The QPRT lets you keep living in your home during this period. Although you still have to pay real-estate taxes and insurance, you get the income-tax benefits of home ownership. After the trust ends, typically you can still live in your home, but you'll have to pay fair-market rent to the beneficiaries at that point moving forward. The QPRT is a highly specialized strategy, but you may want to look into it with the help of an experienced estate planning attorney.
State Estate Taxes. Where you live has a lot to do with the amount of your taxes and how much of your wealth ultimately gets transferred to your beneficiaries. Right now there are 15 states and DC that have an estate tax. Every state can have a different minimum and maximum tax threshold and differing exemptions.
If you live in one of these 15 states with an estate tax, you should talk to your estate planning attorney about the type of tax liability your estate could face in the future.
Reference: The Motley Fool (October 3, 2015) "3 Smart Strategies Designed to Reduce or Eliminate Estate Taxes"
For more information click on: www.epllc-plc.com