If you have worked hard for your entire career to build up your wealth, you want as much of that wealth as possible to reach your children and other beneficiaries when you are no longer here. The last thing you want is for the government to slice off a considerable portion of your estate and divert it towards taxes, probate fees and other costs. With the proper foresight and planning, you can ensure that as much of your estate as possible reaches its intended recipients.
Probate is the process whereby a probate court administers your estate and oversees the distribution of assets after you die. It comes with some fees that could eat into your estate. Luckily, the probate process is completely avoidable through the use of several different types of estate planning tools such as revocable living trusts.
Under this method, you will transfer all of your assets to a trust that you set up for your own benefit. You can still invest and spend the assets however you like, but all of the assets are in the trust’s name, not in yours. Thus, when you die with no assets in your name, there will be no need for probate, and the trust can pass on to benefit your children and other loved ones without having to pay probate fees.
If you already know who your beneficiaries are, and you can spare the funds, it might be a good idea to begin gifting them money from your estate now, while you are still alive. You and your spouse can each gift nearly $12,000 every year without incurring any additional taxes. If you are strategic with your gifting, you can ensure that your money goes where you want it to go while simultaneously reducing the amount that the government can tax when you pass away.
If your estate includes valuable things that aren’t money, such as a family business, there are other types of methods you can use to transfer ownership to your beneficiaries while minimizing taxes. For example, you can create a family limited partnership. This will allow you to control how the business is managed after you die, and will protect it and your beneficiaries from excessive taxation.
These are only a few of the many different methods you can use to minimize costs associated with the transfer of your wealth. Estate planning can be a complex art, with many different tools and methods to choose from. Make sure that you consult experienced professionals in order to craft an estate plan that you can specifically tailor to your unique situation.