After working hard for many years to build up a significant amount of wealth, you don’t want it going solely to taxes. While everyone wants to pay their fair share, many want to preserve as much of their estate for the benefit of their heirs.
Fortunately, there are legal tools you can use to save on federal and Arkansas estate tax. Here are some potential options that you can discuss with an attorney.
Leveraging a Living Trust
Since you can control the assets in a revocable living trust during your lifetime, those assets usually form part of your estate. However, there is a specific kind of trust that can help you pay less in estate taxes in 2018: the credit shelter trust.
A credit shelter trust is irrevocable and allows couples to save significantly on taxes. Upon the death of one spouse, the assets in the trust transfer to the surviving spouse. Properly drafted, the trust can allow for the surviving spouse to use the assets while still alive. When the last spouse passes away, the assets are passed on to heirs, not subject to estate tax.
Speaking with an estate planning attorney can help you determine whether establishing a credit shelter trust is the best option for you and the future of your estate.
Life Insurance Trust
Life insurance sounds like an odd way to save on estate taxes. Essentially, this is an irrevocable trust that buys the life insurance policy. Therefore, once it’s paid out, the beneficiary is the trust, and the beneficiaries of the trust can be your heirs. An experienced estate planning attorney can work with you to decide whether a life insurance trust is the best tool for the future of your estate and your beneficiaries.
Giving Gifts During Life
One straightforward way to reduce the size of your estate is to give money away during your lifetime. You can give away up to $14,000 a year to whomever you choose. Any gifted amount that is greater than $14,000 and the giver has to file a gift tax return with the IRS.
By giving your children and grandchildren monetary gifts during your lifetime, they can start to get some of their inheritance now, tax-free, and they can use their inheritance to plan for their future themselves.
Charitable donations are another way to make your estate smaller, and many charitable donations qualify for write-offs during tax season.
Talk to an Attorney
The rules change frequently regarding who pays estate tax and under what conditions. The best way to sensibly plan for the future is to discuss your financial options with an estate lawyer trained in these matters. To learn more or to make an appointment, contact Estate Planners of Arkansas P.A. today at 501-414-8965.