Two critical functions of estate planning are maximizing tax advantages and saving your beneficiaries money when you pass away. The most common way that people pass on their property is through a will, which is processed through the probate courts. However, for people with wealth, there can be significant financial implications if you solely rely on a will and your estate passes through probate.
How Estate Taxes Work
After probate proceedings, the executor must prepare an estate tax return, which details the total value of the property being transferred to beneficiaries. These estate taxes can be very costly for a high asset estate.
An individual is allowed a lifetime exemption of $11.58 million in transfers to beneficiaries before the federal estate tax takes effect. In other words, throughout their lifetime, a person may leave up to $11.58 million worth of property to their heirs without any tax implication. However, any property transferred above that amount is subjected to the federal estate tax. Up to 40% of every cent above the $11.58 million exemption will go to the federal government as a transfer tax before it can pass to beneficiaries.
Utilizing a Trust Can Bypass Probate
A trust is a legal instrument that allows a person to pass their property on to their beneficiaries without exposing the property to probate. A grantor creates a trust agreement and transfers ownership of property into a trust. This property is controlled by a third party trustee, who can maintain, invest, protect, and make payments to beneficiaries per the trust agreement. At the end of a specified period, or when the grantor passes away, the trusts distribute the remaining property to beneficiaries.
There are many types of trusts that can offer a wealthy grantor unparalleled flexibility and choice. Significantly, when the property is transferred into a trust, it is no longer considered the property of the grantor, which means that it is not subject to probate proceedings and is also not part of the grantor’s taxable estate. Utilizing trusts as a part of an estate plan is a smart and proven method of wealth protection.
Estate Planning Attorneys, Viloria, Oliphant, Oster & Aman L.L.P.
When it comes to estate planning, you have choices that can help you protect your wealth for your loved ones. Viloria, Oliphant, Oster & Aman, L.L.P. is a small-sized law firm that provides top class service for every client. Our estate planning attorneys serve clients with distinction, providing them the custom tailored advice to make informed decisions. Call Viloria, Oliphant, Oster & Aman L.L.P. today at (775) 210-8178 to schedule a consultation or contact our office through our website.