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Tax-saving strategies in estate planning

On Behalf of | Mar 19, 2024 | Estate Planning |

Estate planning is not just about passing on your assets to loved ones. It is also about minimizing the tax burden they may face after your passing.

By employing smart tax-saving strategies, you can ensure that more of your wealth goes to your beneficiaries and less goes to the government.

Utilize tax-advantaged accounts

One effective tax strategy in your estate planning process is to use tax-advantaged accounts, such as retirement and health savings accounts. Funds held in these accounts can grow tax-free or tax-deferred, allowing you to accumulate more wealth over time. Additionally, you can pass assets held in retirement accounts to your beneficiaries with certain tax benefits, potentially reducing their tax liability.

Gift assets during your lifetime

One reason 67% of individuals may not have estate plans is their intention to gift their assets. The IRS only allows you to gift up to a certain amount each year to individuals without incurring gift taxes. You can gradually and strategically transfer wealth to your loved ones while minimizing the overall tax burden on your estate.

Establish trusts

Trusts are powerful estate planning tools that can help you achieve various tax-saving objectives. For example, a revocable living trust allows you to transfer assets to beneficiaries without going through probate. Irrevocable trusts can remove assets from your taxable estate, further minimizing estate taxes.

Tax deductions and credits

Charitable donations made through your estate can reduce estate taxes while supporting causes you care about. Additionally, you may deduct certain expenses related to administering your estate, such as legal fees and funeral expenses.

It is important to review and update your estate plan regularly. Tax laws and regulations change over time, so what may have been an effective tax-saving strategy in the past may no longer be optimal.

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