While most people in California won’t have to bear the burden of estate taxes when inheriting a loved one’s assets, many will, as a large number of wealthy people live in the state. If you have considerable assets, you can take steps now that will reduce estate taxes after you die.
Use transfers, gifts, and trusts to safeguard your assets
You’ll find many legal ways to reduce the estate tax for your heirs. The trick is finding which ones work for your situation. One of the easiest ways is a marital transfer. This method doesn’t eliminate estate taxes but merely reduces them with the thought that your spouse will spend down the sum, reducing the obligation.
Other ways may be more practical, especially if you want to help family members or reduce your current burden. Consider these methods:
• Gifting to children and grandchildren, with special rules for gifting to minors
• Trusts, including AB and QTIP marital trusts, irrevocable life insurance trusts, charitable trusts and qualified personal residence trusts
• Private annuities
• Special use real estate valuations
If you have a family business, you may benefit from a family limited partnership that can minimize current taxes and ensure the continuity of the business.
Which method is right for me?
Every estate is different. Even if your heirs will have to bear little to no estate taxes, careful estate planning can give you peace of mind and ensure that you assets are left to designated individuals, according to your wishes.
In many cases, a combination of trusts and other financial instruments will protect your assets and give you income to live on during retirement. Take your time to understand the options. Structuring your estate properly can also ensure that your assets do not have to go through probate after your passing.
