Estate Planning Mechanisms & Tax Information
The steps taken for ensuring a smooth transfer of assets and wealth after the estate holder’s passing is known as estate planning in Scottsdale. On a very basic level, it could be a simple will. It is also possible to setup complex wealth transfer devices in order to help reduce the estate tax burden and other expenses associated with carrying out the transfer.
In addition to wills, the devices used include trusts, powers of attorney and gifts, among others. The choice usually depends on how much wealth and assets there are, and what (if any) is the purpose or intended use of the wealth by the recipient. The process is complicated further due to constantly changing federal and state tax laws that govern transfer of wealth.
Wills are the easiest, as far as setup is concerned. But the real problems – probate costs and delays, pop up after the estate holder has passed away. These problems can be avoided by using a Trust, but there is a common tendency to assume that trusts are only for really wealthy people.
Wills are essential in any case. But a trust on top of that gives the estate holder the ability to maintain some control over when and how the wealth is transferred and used by recipients. The legally sound and unchallengeable nature of a trust helps avoid all the costs, delay and hassle of a probate court.
Giving gifts is another way of reducing the estate tax burden. It’s possible to dole out $13,000 per year ($26,000 for a married couple) to a recipient without any tax being imposed. Also, an unlimited amount can be paid tax-free directly to an educational or medical institute on behalf of the gift recipient.
Constant legislation by Congress has led to ever-changing estate tax laws. The maximum amount that can be transferred as an estate without being hit with taxes has varied for the past two years, and is likely to change again next year. In order to find out the exact estate tax liability and the right way to minimize the tax, it is best to contact an estate planning consultant.
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