Estate tax planning involves more than the creation of a will or trust, it involves a thorough evaluation of your assets, asset ownership, the beneficiaries you wish to designate to receive your property after you have died, and an analysis of your options to minimize, reduce or eliminate estate taxes.
The transfer of property after death is considered a right, therefore it results in an estate tax. However, a person receives a tax credit when they die so that the estate tax can be eliminated or reduced. There are federal and state exemptions that change from year-to-year.
Nevertheless, there are ways in which estate tax can be minimized or eliminated, which can be established through proper estate tax planning. For instance, property that is passing from one spouse to another is not subject to the tax, nor is property going to a charity. It is very possible through proper planning and the help of a Minneapolis estate planning lawyer that your beneficiaries can receive significant inheritances without paying estate tax.
Each individual has certain gift tax exemptions that they may use annually and during their lifetime. The exemptions are subject to change from year-to-year. Any gift over the exempt amount results in a tax being imposed.
Trusts are valuable tools in providing tax protection. Individuals and their beneficiaries may be able to enjoy the assets within their trusts without having to pay taxes. Trusts can be revocable or irrevocable, with the revocable trust allowing for changes to be made when needed and an irrevocable trust being unalterable. Trusts can also reduce the inheritance tax imposed on your beneficiaries.
The exact tax benefits will depend upon the structure of the trust, but you can count on there being a tax benefit for both you and your beneficiaries. Your assets are also able to avoid probate, making the asset distribution process much quicker for your beneficiaries.
Contact Eastlund Hutchinson at (952) 894-6400.