Tax Advice

One of the goals of estate planning is to minimize the amount of taxes that may become due as a result of transfers of asset, either during the individual’s lifetime or upon death. Consulting with your attorney can help you discover and explore various techniques and mechanisms available to limit the amount of taxes that are placed on such transfers. 

Here I will list some of the most basic ways that individuals can utilize estate planning tools to minimize or prevent unnecessary estate and/or gift taxes:

Avoid Gifting to an Individual to Pay for Medical or Educational Costs
Rather than gift to an individual for these reasons, it is a better idea to make a payment directly to the medical provider or educational institute. Because these gifts, in certain circumstances, do not count towards annual or lifetime gift exclusion amounts, the amount of the gift can be unlimited.  Not to mention, individuals can make sure the gift goes towards the intended cause by paying directly to the source.

Be Careful About What Is Gifted
In the event that property value appreciates significantly, individuals can avoid some of the taxation on the piece of property by transferring the property at death or retaining certain life time interest in the property. Parties should always know the exact time and method in which a gift will be taxed to minimize any negative effect. Go here for a guide to estate taxes.

Designated Beneficiaries
Individuals often fail to make sure that lists of designated beneficiaries are updated as lifetime events and changes occur.  Such failure to update designated beneficiary lists can result in substantial negative tax consequences for the donor, the donor’s estate and for designated beneficiaries.  Proper estate planning is intended not only to benefit the individual drafting the estate plan but also to make sure that any designated beneficiaries are also able to take advantage of any potential reductions in taxes.

Benefits from Retaining the Service of an Estate Planning Attorney
While it is easy to obtain documents and recommendations online about how to compose estate planning documents, estate planning requires not only that documents be accurately written but also that an entire estate plan be crafted to meet the individual goals.  There are also numerous complex laws, both in the Commonwealth of Massachusetts and on the federal level, that are not easily discoverable. Given the variety and great importance of the available estate planning documents and tools and considering that an individual will likely not be around to resolve any ambiguities in his or her estate planning documents, retaining the services of experienced legal counsel is often a wise idea.

Resources for Taxes

A Guide to Estate Taxes

Estate and Gift Tax

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