When planning your estate plan you might be wondering what you can do to save on taxes. If you are not careful you can be taxed high on your estate taxes. Many people wonder what they can do to protect their hard earned money so that after they pass away, the majority of their money goes to their family and not to the federal government in taxes. Here are a couple ways to save money on your estate tax:
1. Gift Money While Alive
If you have a large estate, it might be worth gifting some of it before you pass away. Each year you have a limit of how much you can gift a person without having to pay any taxes on it. This means that you can give your child, friend or acquaintance up to $14,000 without having to pay any taxes on this. For many people that can be a major benefit.
If you are worried about giving that money to your family early on, you should consider gifting it into a trust. This is like a separate account that you child can't touch until certain criteria are met. It will still allow you to gift the money, without necessarily giving it to them now.
2. Joint-Ownership Over Property
Assume that you want to give your house to your child after you pass away. This means that when you die, the house is appraised and then it is taxed for its value.
After the estate has paid the taxes then the deed can pass over to the child. If you want to avoid paying this property tax, then you should consider having the child have joint-ownership over the house before you pass away.
If you put the child on the deed as a joint-owner then when you pass away, then the child just becomes the primary owner. In most cases, they won't have to pay taxes on it.
3. Set Up A Trust
Although trusts are still taxed, they usually have better tax implications that a will does. They definitely have better tax implications that having no estate plan does. With a trust your property and assets pass straight to the beneficiaries. You don't have to go through probate, or through the courts. This is why so many people choose to put their property and money into an estate.
These are just a couple ways you can save money on your taxes. To learn more, contact a company like Wright & Wayment, PLLC with any questions or concerns you have.
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