Spring Forward with Tax Planning: Estate Planning Strategies to Minimize Estate Tax Burdens

Estate Planning requires careful consideration of all financial burdens that you or your family may experience later in life and after death. It is often critical for individuals to review the strategies they have in place on a routine basis, at least one time a year, so they can make adjustments when there is a need to do so. This spring, allow our legal team at The Siegel Law Group, P.A. to help you get up to date with Estate Planning strategies to minimize estate tax burdens. 

Understanding Estate Tax

An estate tax, under IRS rule, is a tax paid at the time of death to transfer property from a person who has died to another party. Most people want to ensure their heirs receive as much of their estate as possible after death. Working to reduce the implications of an estate tax should be a core component of any Estate Planning process.

Estate tax requires accounting for all of the property owned and interests a person has at the time of their death, estimating fair market value for those items, and then determining what taxes must be applied. After all taxes are paid (at the federal and state level) the remaining funds are paid to heirs.

There is an applicable threshold to this. For 2024, the IRS will level a federal estate tax on any individual who has access to $13.61 million or more in fair market value at the time of their debt. This includes all types of assets, such as:

• Cash
• Stocks and investment holdings
• Interest in life insurance
• Interest in annuity contracts
• 401(k) and other retirement holdings
• Personal property

Estate taxes are applicable in many situations. They directly reduce the money and assets you leave behind to your family if you have not planned for them.

Strategies for Minimizing Estate Tax Burdens

With the help of an Estate Planning Attorney, you may be able to reduce some of the financial impact estate taxes have on your property and, ultimately, your heirs. When you meet with our Estate Planning Lawyer, we will discuss specific strategies applicable to your situation and create a plan for minimizing the impact in any beneficial way.

Wills and Trusts

A Will is a document outlining the division of property of your estate. A Trust is a type of holding mechanism that allows for your estate to maintain its own identity, shielding it from some types of estate taxes.

Both Wills and Trusts are beneficial in reducing Probate costs and taxes. Several options exist that may apply, including:

• Living Trust:
  A Living Trust is a legal arrangement that protects assets and directs distributions after death. A trust allows you to leave assets to others after your death, protecting them from Probate. The funds transfer to your heir, within the goals of the trust, at the time of death or when other requirements are met.
• Bypass Trust:
  A secondary option is a Bypass Trust or AB trust. If you are financially well-off and married, this method may allow for your spouse’s assets to be transferred to a trust at the time of death. This allows for bypassing some of the estate taxes on the property.

Gifting

In short, lifetime Gifting, the process of giving heirs gifts during their lifetime, may aid in reducing estate taxes later. Under the current law, individuals can give up to $17,000 to any number of people each year. This means that you do not have to pay a tax on that gift as long as it is under the threshold.

Retirement Accounts

Another strategy for reducing estate tax is to establish a retirement account such as an IRA. An IRA does not require the holder to take minimum annual distributions from it like other types of retirement accounts. As such, the retirement account holder can assign a beneficiary to receive those funds at the time of death, transferring the retirement account to the beneficiary outside of the Probate process.

Life Insurance

Through specialized Trusts specifically designed for life insurance, it may be possible to provide heirs with a significant inheritance and offset some of the estate taxes otherwise required.

Business Success Planning

This method allows you to plan and transfer ownership of your business during your lifetime in an effort to minimize taxes. This allows you to reduce taxes when it comes to passing your business to your heirs.

Charitable Giving

Charitable giving also allows you to be more in control over what occurs to your estate. By donating your assets, you eliminate the risk of the government gaining access to these funds. You can set up an Estate Plan that allows for your assets to be sheltered from estate taxes because they are promised to a qualified charity.

Additional Considerations

It is critical to consider estate taxes as a component of your Estate Plan. However, working with a professional is critical. An Estate Planning Attorney will create a method that is fitting for you based on your assets, concerns and goals to minimize any type of financial loss involved. The key here is to tap into a professional’s experience to help facilitate this process.

Keep your plan up to date as well. Meet with your Estate Planning Attorney on a consistent basis – at least one time a year – or any time there is any substantial change in your goals. This enables you to make changes to your plan to meet current legal requirements or to adjust your plan to minimize additional estate tax rules. Reflect on changes in your life as well as in tax laws, especially in the value of those exclusions and limitations, and adjust accordingly.

Call THE South Florida Estate Planning Attorneys – The Siegel Law Group, P.A.

Planning to avoid estate taxes is a smart strategy. With the help of a professional, it is more accessible than you realize. Call the Florida Estate Planning Attorneys at The Siegel Law Group, P.A. at (561) 955-8515(561) 955-8515 to schedule a complimentary consultation, or submit our online contact form to schedule a consultation today. If you have any questions, do not hesitate to contact us.