The Top 3 Things You Need to Know When Planning an Inheritance
Planning your estate can seem like an overwhelming task. The thought of planning for your children after your death is daunting in its own right. However, there are some big steps you can take right now to make sure your family receives the maximum benefits from your estate in the future.
- Avoiding or Reducing Income Taxes after your Death
An important part of estate planning is how to make sure that your estate beneficiaries will be able to avoid paying income taxes on inherited assets that appreciated in value prior to your death. This is called the “step-up in basis.” For example, when a parent dies with proper planning, their heirs may receive a new cost basis in certain assets (such as real estate, stocks and bonds) for income tax purposes. Instead of the parent’s original cost basis, the heirs can value the property at fair market value. Thus, if they sell the inherited assets shortly after the parent’s death, they pay little or no capital gains taxes. It is one of the most tax-efficient ways to amass money for your family and reduce tax bills when an investment is inherited.
- Leaving Assets in a Trust
Estate planners encounter many parents leaving assets outright or directly to their children in their Wills. Experts advise that instead those assets should be placed in a trust for the most protection. By leaving the assets in trust rather than outright, the child and possibly future generations get to enjoy, use and benefit from the trust assets without being subject to claims of potential creditors or predators. For example, if your child gets a divorce, money in a trust typically is not considered part of the marital estate so an ex-spouse will not be entitled to any share of those assets. A Trust also minimizes a child’s exposure to other potential creditor claims (such as an automobile accident or professional malpractice claim).
- Working with an Attorney to Minimize Taxes
DIY estate and inheritance planning can be cheap. However, it may not be worth the cost of leaving your i’s undotted and t’s uncrossed. An experienced estate planning attorney will guide you through writing a will, creating a trust, appointing a power of attorney, and other ways to protect your family. Filling out generic forms online don’t take specific familial situations or state laws into consideration, and could make inheritance planning more complicated and expensive down the line.
Estate planning attorneys are skilled in maximizing what you leave to your beneficiaries and your estate as a whole. The best way to maximize an inheritance is to minimize taxes, and that changes depending on where you live. Florida has no state inheritance or gift tax. This means that if you are a Florida resident, you only need to be concerned with the Federal estate and gift taxes.
It’s Never Too Early to Start Planning
Waiting too long to plan your estate can have detrimental effects on your family. St. Petersburg’s Legacy Protection Lawyers take the time to get to know you, your wishes, and your goals so they can craft your personalized estate plan. From trusts to asset protection, we have a wide range of legal services to ensure your legacy is protected and preserved for your loved ones. Get started right away by contacting us online or giving us a call at 727-471-5868.