Estate Planning Strategies

Estate Planning Strategies
By: Kris Koonar

The reason for making an estate plan is to ensure that all your assets are handled in accordance with your intentions after your demise. The plan consists of creating a host of legal documents which may include deeds of trusts, a will and other legal instruments. You may want to purchase various types of insurance policies in line with your strategies of estate planning, and may also want to make charitable gifts.

A properly crafted estate plan can help you to limit the uncertainties connected to your financial affairs. You may be faced with the dilemma whether your family will be provided for in the event of your untimely death. To provide a fitting solution to this, you need to discuss your personal goals with your lawyers, financial advisors, and those responsible for tax and legal matters or a qualified estate planner/CPA, in order to make a suitable estate plan. This will help you to cast a legally tenable framework that would minimize estate tax obligations, thereby allowing a bigger share of your assets to pass on smoothly to your loved ones, with the least hurdles. However, all estates are not liable to taxation. As of 2006, estate valued at two million dollars and below has been exempt from estate taxation.

One of the strategies that you can employ while making your estate plan can consist of taking advantage of marital deductions. This provision allows you to leave all your assets to your spouse, without any estate tax liability, irrespective of the size of your estate. You can also divide your assets between you and your spouse in your lifetime, which can lessen the estate tax burden of the surviving spouse.

If you have a large estate and family and friends whom you would like to benefit from your estate, you could start by gifting them amounts according to nontaxable limits. For instance, you can gift $12000 in a year ($24000 for a married couple) to anyone without you or the recipient being subjected to any tax. You can think of gifting above the nontaxable limit also, as estate taxes are higher than gift taxes. While resorting to the gift strategy, you need to consider your own financial future and your needs in times of illness and other unforeseen exigencies.

You can decide to form trusts like a revocable trust wherein your assets are not subjected to the process of probate, and are directly passed on to your heirs. You can create a charitable trust in which your estate is passed on to the charity as instructed by you in the trust deed. You can also choose to create an irrevocable life insurance trust which would allow removal of proceeds from your taxable estate in order to reduce or even eliminate estate taxes, resulting in a larger share of your assets going to your beneficiaries.

Many people with businesses want to ensure that their children too have enough money to continue running the business after their demise, or those who have large estates to pass on to their offspring or others, go for a second to die life insurance. This policy covers two people, generally married couples, and when both die, the policy proceeds are given to the beneficiary(s) who can then pay off the estate taxes. This way, the estate tax burden is delayed until the death of both the insured people.

You may also need to make provisions for your own care in case of severe illness or disability, when you become incapable to manage things on your own. For this, you can create a living will, which will specify how you are to be cared for in case you become incapacitated. Another document for a similar situation is a durable power of attorney, which specifies a person whom your trust to handle your affairs in case of your inability to do so on account of health reasons or other limiting factors. This spares interested people from deciding who should be in charge of the affairs.

There are many other ways of estate planning, but the cardinal rule in every case is to take the help of professionals and experts while finalizing estate planning strategies and initiating action.

Article Source: http://www.articlesbase.com/non-fiction-articles/estate-planning-strategies-160250.html

About the Author: Kris Koonar. California Tax Help is easier than ever with former IRS agent Murray and Young a Sacramento CPA Firm. To view our services and new articles for 2007 Estate Tax Planning please visit our award winning site http://www.april15.com.