Call nowBook now
9404 Genesee Ave., Suite 340
La Jolla, CA 92037

Estate Tax Planning

You may know the net value of your estate as it stands today, but what will it be on the day you die? There is one important reason to get this right. It concerns the estate tax, and if your holdings on that date exceed the exemption limit, between 45 and 55 percent of your net worth will be heading straight to the government. This amount will come on top of any probate expenses and final income tax filings, and within nine months after your death, the Internal Revenue Service will expect your executors to cough it up in cash.

Fortunately, there is an answer. It involves reducing the size of your estate, and that’s where Heffel Law Firm can help.

How the Government Computes Your Taxable Worth

In determining your estate’s net value, you need to consider the aggregate of what the IRS considers to be the fair market value of your holdings at any point in time. Applicable assets include: – Annuities.

  • Bank accounts.
  • Business interests.
  • Cash and securities.
  • Death benefits.
  • Investments.
  • IRAs.
  • Personal property.
  • Real property.
  • Retirement plans.
  • Trusts.

Having added up the worth of all such assets, you will then subtract your total debts and hope that whatever is left falls below the top exemption amount. As of 2016, the limit stands at $5,450,000 per person. If you find that you’ll be over that, it’s time to ask Heffel for help.

Estate Tax Reduction

There are several tried-and-true methods of reducing the taxable assets in your estate. Some of these strategies include:

  • Marital transfers. If your spouse is a United States citizen, any conjugal gifts you give or bequests you leave will be exempt from estate taxes while for non-citizen spouses, the qualified domestic trust applies in a similar way.
  • Lifetime gifts. As of 2016, you can make tax-free gifts of up to $14,000 apiece every year to any number of beneficiaries. The strategy allows a husband-and-wife team to give away a total of $28,000 annually to each recipient. Over the years, this sort of gifting can take a sizable bite out of your taxable estate.
  • Uniform transfers to minors. Instead of passing directly to a child, this form of gift goes first to a custodian who will only distribute it to the child after he or she has come of age. As with the lifetime gift, the current annual exclusion of $14,000 per child will apply.
  • Family limited partnerships. Under certain conditions, this revocable tool permits the transfer of closely held family-owned businesses to members of the following generation. The tactic offers protection from creditors while benefiting the partnership with a lower rate of taxation.
  • Private annuities. This alternative form of a common financial structure involves the transfer of property to a private individual instead of to an insurance company. The recipient, in return, agrees to pay you a percentage of that asset’s value every year for the rest of your life. The IRS determines the applicable interest rate, and the asset no longer counts as part of your financial holdings.
  • Irrevocable life insurance trusts. By accepting the transfer of small amounts of money equating to life insurance premiums, this type of instrument permits you to create a tax-free asset in the form of life insurance proceeds while at the same time lowering your estate tax liability.
  • Charitable transfers. Those who make a lifetime charitable transfer or gift will enjoy a double benefit. This strategy delivers an immediate income tax reduction while at the same time decreasing the size of the estate. Up until the day they die, persons making this sort of grant or endowment can often continue to use the asset or benefit from any income it produces.
  • Real estate valuation techniques. The government normally assesses landed property in accordance with what it considers to be its best and highest use. Nevertheless, under certain conditions, it is possible to base a property’s value on its actual use instead. A tax attorney can help to determine whether your property qualifies for this more advantageous valuation.

These are just a few of the available strategies for reducing the size of your taxable estate. At Heffel Law Firm, we want to help you save on what can often amount to an exorbitant and unexpected outlay. Our advice concerning estate tax reduction will help to ensure that your loved ones benefit from the monies that you’ve planned for them to receive.

Contact Us