Estate Planning And Avoiding Extensive Taxation

Jun 9
21:01

2012

Aloysius Aucoin

Aloysius Aucoin

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Regardless of a person's age, estate planning ensures that finances are properly dispersed. One of the most common concerns is loss of funds due to taxation.

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With a little help from a professional,Estate Planning And Avoiding Extensive Taxation Articles estate planning becomes less of a chore and more of an opportunity. Without a will and a plan, when a person passes away, he gets no say in how the money and assets are distributed. When there are documents outlining how the money is to be spent and actions are taken in advance to prepare, a person can avoid many common tax pitfalls. There are ways to lessen the tax burden and make sure that loved ones receive the maximum amount of money.

Lack of Plans:
Some people see estate planning as a waste of time. Instead, they choose to spend the money or give the money away. The result is that there are no funds left to be taxed when a person passes away. On the one hand, this is a great way to enjoy the money, have a good time, and instantly make a difference in the lives of loved ones. On the other hand, there is no way to know how long a person will live or how much money will be necessary to live. Spending it all too early could mean being destitute for the final years of life.

In order to balance things out, some people choose to gift some money to people each year. If there are enough funds available, this is not a bad idea. In moderation, this could be an option for someone that wants to share his wealth with loved ones.

A Living Trust:
A living trust can be set up for married couples to ensure that they avoid some of the common taxes. This type of estate planning can be down with an attorney and should be researched before entering into the agreement. In most cases, a couple will need to have at least double the federal maximum of total assets. When this is complete, the taxes are completely predictable and the situation is easy to navigate and administer. This is a revocable trust. If something happens, it is possible for one or both of the people involved to be get rid of the agreement. This will change the tax liability.

Irrevocable Trusts:
Giving up the option to make changes to a trust makes this a permanent decision. An estate-planning attorney may give an individual or a couple this option for several reasons. By taking away some of the assets associated with estates, a person reduces that amount that can be taxed. In essence, the tax liability is decreased.

For someone with a home that has considerably increased in value over the past years, a personal residence trust makes sense. The home and property is added to the trust and no longer considered an asset. The eventual beneficiaries do not collect the home right away but must wait for several years to ensure that the timing is right.