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4: Minimizing Your Tax Liabilities

Transfer taxes on non-charitable gifts during your lifetime and through your estate can be significant. Virtually everything you own or control may be subject to federal estate, gift and generation–skipping taxes, as well as state inheritance taxes all of which can substantially reduce what you pass on to your heirs.

Not everyone is subject to federal estate tax. If the value of your taxable estate is less than the federal estate tax exemption at the time of your death, it will not be taxed by the federal government. But for estates valued over that amount, creative estate planning can avoid or minimize tax liabilities. Keep in mind that many states still have an estate or inheritance tax that will start to tax your estate or distributions to non-charitable heirs.

Things You May Want to Consider

  • Some strategies may call for you to relinquish control of certain assets during your lifetime.
  • If the value of some of your assets decreases, tax savings realized by your estate tomorrow may not justify the expense of elaborate planning today.
  • The 2012 American Tax Payer Act made permanent several important estate tax provisions. If your estate plan has not been updated to account for the Act, it may be time for another review.
  • Creative planned gifts can be among the least complicated and least costly tools to minimize estate taxes.

Next: The Basic Planning Tools

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