Estate planning is used as a one size fits all description of a process, however the reality is that there are a number of different levels involved within the process.
Basic Estate Planning
At its most basic, estate planning is a matter of recognizing the need to care for your family and ensure that your assets are distributed as you wish them to be. In order to do this, you will find that basic estate planning is a matter of writing a will, assigning power of attorney, crafting a living will and assigning a healthcare proxy and, in some cases, establishing a trust.
Depending on where you live, you may be able to take some of these steps on your own, however it is important to remember that federal and state laws that govern estates will come into play and you need to be aware of what these laws are. For this reason, even in states that do not require having a lawyer assist you with estate planning, working with an attorney is often the best idea.
Irrevocable Life Insurance Trust
One of the benefits of working with an attorney as you focus on estate planning is that you will be able to learn more about various trusts that will enable you to plan further for your family. One of these trusts that offers a number of benefits is the irrevocable life insurance trust.
An irrevocable life insurance trust:
- Removes your life insurance from your taxable assets.
- Can be used to pay estate costs.
- Can provide cash to your heirs.
On many levels, this is beneficial because it gives your heirs access to tax-free income, however, in order to take advantage of it, you must surrender ownership rights to your life insurance policy.
Family Partnerships
Establishing a family limited partnership is considered to be one of the more savvy estate planning strategies – something that will protect assets, avert liabilities and provide a number of short term benefits as well:
- Annual income tax savings
- Savings on future estate taxes
- Protection of assets
In addition to working with an estate planning attorney throughout the process of setting up a family limited partnership, you will want to be sure that there is an accountant familiar with the process on board to ensure that everything is in order.
Reducing Your Estate
In order to reduce your estate in an effort to limit the estate taxes that will need to be paid later, it’s important to consider the maximum amount of assets that can be transferred tax free, gift limits, and marital transfers.
Additionally, working with an estate planning attorney can help you to learn more about the following and how they can effectively reduce your estate:
- Credit shelter trusts
- Qualified terminable interest property trust (QTIP)
- Gifting
- Giving to charitable organizations
- Taking advantage of a charitable remainder trust
Reducing Taxes
When you are looking at the opportunities that will help you to ease the effect of estate taxes on your family after you have passed, there are a number of ways in which an estate planning attorney can help you to reduce the taxes that your heirs will be required to pay.
An estate planning attorney can help you to learn more about:
- Taking advantage of the federal and state exemption taxes
- Creating family partnerships
- The benefits of leaving part of your estate to charity
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