If your estate is worth over a certain amount, your heirs could owe taxes to the federal government. You have worked a lifetime to save and invest, and you do not want your heirs to pay taxes to the federal government unnecessarily. There are tax saving measures that you can take now that could minimize the estate taxes paid. An estate planning attorney can work with you on strategies that may save your heirs money.
Few households will need to pay a federal estate threshold. The government charges 40 percent of estate assets over $13.61 million. If a household does owe estate taxes, it would be a significant amount of money. Thus, large estates need planning to reduce the tax burden.
Lifetime Gifts to Children and Grandchildren
Under federal law, you can give up to $17,000 annually to each child and grandchild. Each spouse can give that amount to a child. If you begin to give gifts early, it can take money off your tax obligations. This way, you can also pass money to your children while you are still alive.
You can also give money to minors with even fewer restrictions. Virginia has its own version of the Uniform Transfer to Minors Act, where you can gift property to minors without the need to establish a trust.
Maximizing Charitable Donations
Charitable donations are one way to save on tax obligations. You may have a favorite charitable cause that you may want to support when you are no longer living. Money that your estate leaves to charity would not be subject to the estate tax. You could set up a charitable trust to tax advantage of tax benefits.
The two types of charitable trusts are as follows:
- Charitable lead trusts lead to an immediate tax break when the money is placed into the trust. Money would be distributed to the charity during the lifetime of the grantee. The money is transferred to the non-charity beneficiaries when the grantee passes away.
- Charitable remainder trusts give the money immediately to the charity. The charity possesses the money and may make payments to the donor. When the donor passes away, the money will remain with the charity.
Irrevocable Life Insurance Trusts
Placing life insurance in a qualified trust can shield the policy’s proceeds from federal taxes. Assets that are placed in a trust are taken out of the estate. Your beneficiaries will still receive the death benefits. The trust instrument will determine when and how they receive money from the trust.
The main requirement is that the trust is irrevocable. Once you establish the trust and place a life insurance policy, the trust cannot be changed.
Qualified Personal Residence Trust
Your home could be a large part of the value of your taxable estate. You can take your home from the estate by placing it in a qualified personal residence trust. You can remain in your home for the duration of the trust. Once the trust period ends, the home passes to the beneficiaries. If you pass away during the trust period, the home’s value would still count against the estate tax.
These estate planning options are complex; you need an attorney to help you execute the necessary paperwork. Your lawyer would explain options that could help lower your estate tax burden.
Contact Our Virginia Beach Estate Lawyers at Anchor Legal Group, PLLC for Help With Your Estate Plan
Our Virginia Beach estate lawyers at Anchor Legal Group, PLLC will help you take a proactive approach to estate planning. Call us at 757-LAW-0000 or contact us online to schedule a consultation. Located in Virginia Beach, we serve clients in Chesapeake, Norfolk, Suffolk, Portsmouth, Newport News, Hampton, Williamsburg, and Eastern Shore, Virginia.