Taxes will be one of the biggest challenges that your estate faces. This is why avoiding probate is such a big piece of the estate planning puzzle. This can help with many financial costs and taxes that are applied to an estate. But avoiding probate isn’t the only thing that you can do to protect your estate.
Transfers are a helpful tool to anyone planning their estate. You can transfer funds or property to a spouse before your estate is administered to eliminate any tax obligations your estate would have (though your spouse’s estate would then be at risk of being taxed over these assets). You can use a uniform transfer to a minor to gift assets to them (under the guise of a custodian). And you can transfer assets to a charity to avoid the potential taxes relating to those assets.
Trusts are another crucial way that someone can avoid heavy taxation on their estate. AB trusts and QTIP trusts can help a grantor avoid the federal estate tax threshold, while QTIP trusts facilitate the transfer of assets to a trust while still allowing the grantor some semblance of control over the assets. An irrevocable trust can also help, allowing the grantor to shrink the potential taxable portion of his or her estate.
No matter how you decide to manage your estate so as to minimize the taxes that apply to it, you should make sure that your estate is properly handled and managed by consulting with an attorney that has experience dealing with estate plans.
Source: FindLaw, “10 Ways to Reduce Estate Taxes,” Accessed May 12, 2016