How Estate Planning Saves a Family Money

With proper estate planning, a family can take control of their estate to significantly reduce estate taxes and inheritance taxes that will be imposed upon their death. After accumulating one's life worth, the last thing that anyone wants is to have a large portion of their wealth reduced by government-imposed taxes.

An estate consists of all the money and property that an individual owns. Taxes are the largest expense that any estate will incur. The cumulative total of the applicable estate tax that is applied to a particular estate is directly correlated to the value of all of the assets inside of it. The federal estate tax alone currently reduces your total worth by up to 45%, depending upon on the estate's value, and this rate is set to increase in the near future. The inheritance tax rate varies with each state, but has an average of 10%. This brings the total of your estate's potential loss to 55% of its original value.

Your estate is responsible for paying federal estate taxes prior to disbursing the remaining balance to your heirs. The amount that any heirs receive is the remaining balance of the estate after all expenses, including taxes, have been paid. Once they have received their portion, your heirs will be personally liable for inheritance taxes.

Estate planning tools allow individuals to distribute their assets in the most economical way. These IRS- recognized devices ensure that your property goes to the intended heirs with minimum tax implications or creditor claims. When individuals use estate planning properly, they can potentially increase the asset shares of each individual heir. Your estate can retain thousands, if not hundreds of thousands of dollars on its distributable assets. If you do not have proper estate planning in place, your estate can potentially face a value of only 45 cents on the dollar.

Using techniques such as trusts, lifetime gift transfers, property title transfers, and life insurance can help curb any tax implications. Having items stay out of probate will allow you to avoid estate taxes and will significantly reduce the applicable time period that heirs have to wait in order to gain control of the assets that have been transferred to them. Incorporating estate planning into your financial picture is the best way to keep your accumulated wealth safe.

Sources
Internal Revenue Service
http://www.irs.gov