Tax considerations should always be evaluated as part of your estate planning process. Working with an estate planning attorney in your region gives you the chance to create a customized plan that accounts for your concerns, needs, and the needs of your future beneficiaries.
There are several different ways that you may be able to minimize or eliminate tax obligations in your estate, and working with an attorney is extremely important because it is vital that these plans be implemented accurately. Your first option is an irrevocable life insurance trust. This is a trust that is established on a life insurance policy. When the insured party passes away, the trust owns the life insurance, and the trust then receives the assets rather than the person directly. This keeps the proceeds out of the insured individual’s estate for the purpose of minimizing estate taxes.
If you have substantial wealth already, this can be a valuable strategy for minimizing what’s inside your probate estate. Another way to possibly pass tax free wealth is using what’s known as a step up and basis. When an individual sells an appreciated asset, the person who sells the asset will have to pay taxes on the difference between the asset’s original value and their increase in value since it was first acquired. If an asset increased in value over a significant period of time, these taxes can be very high. However, tax basis of assets are stepped up at the time of fair market value when the person passes away.
Make sure to discuss your options directly with your estate planning attorney. Finally, do not forget about the lifetime gift tax exemption. Right now, you’re eligible to pass up to $17,000 tax free to any individual within any given tax year. Furthermore, you can also give up to $12.92 million in property or assets during your lifetime or as part of your estate. This can help significantly minimize your tax obligations and those that any beneficiaries may experience issues with due to depleting your estate account value. Contact an estate planning attorney to discuss these options in further detail. Our Michigan estate office can help.