California Advanced Estate Planning Attorneys
Planning For Your Future and Beyond
When it comes to transferring assets in accordance with your wishes in the event of your death, it is important to be aware of the taxes and other expenses involved in the transfer process. Many individuals are unaware that transfer taxes and income taxes can deplete the funds you transfer by more than 85%. Advanced estate planning focuses on minimizing the impact of these expenses on your beneficiaries. When you plan out the future of your estate, you assume that your beneficiaries will receive the full amount of the assets you have allocated for them. Without the proper planning, you run the risk of leaving only a fraction of your assets to those you love, along with a lot of legal leg work with probate. A California advanced estate planning attorney can help you navigate through the complex laws and high taxes associated with transferring assets.
Gift tax and estate tax are two very serious taxes one should be aware of when planning the future of his or her estate. Without proper legal guidance, it could be possible to lose most of the value of your estate. A gift tax applies to any transfers made during your lifetime. Estate tax applies to the transfer of funds after an individual’s death. There are a number of deductions that can lower this tax, such as marital or charitable deductions. We will take an in-depth look at these taxes as well as ways you can ensure your estate is being distributed in accordance with your final wishes.
What is a Gift Tax?
A gift tax is what you pay when you transfer money or property without receiving anything of substantial value in return. This federal tax is levied on taxpayers who give money, real estate, or other forms of property exceeding the lifetime gift tax exclusion limit of $13.99 million. Also, any gifts valued over $19,000 in one year per individual must be reported to the IRS.
This means that you will not have to pay taxes on any gifts $18,999 or under in a year per individual, and you won’t have to pay taxes on gifts given in your lifetime that are $13.98 million or under.
There are some instances where you can transfer wealth that does not count as gifts, such as education or medical expenses given to someone else.
The percentage paid on the gift tax is based on a sliding scale and is determined by the size of the gift.
What is an Estate Tax?
Federal estate taxes are also called the “death tax.” This federal tax is levied on a deceased person’s inherited assets. This tax only applies to estates worth $13.99 million or more. Because of this upper limit, very few people end up having to worry about estate taxes. However, when you exceed this threshold, your family could end up losing millions in tax costs without proper advanced estate planning services.
Assets inherited by the surviving spouse are generally not taxable according to federal estate tax rules.
It is important to properly plan for the transfer of your estate after your death. Doing the work now can benefit your family later, allowing them to keep more of your estate and worry less about the probate process.
If you have minor children, you may choose to create a trust that pays for their education or medical costs, which are not taxed the same way as other gifts.
How Do You Plan Around Estate and Gift Taxes?
There are a plethora of tools you can use to ensure as much of your estate as possible gets to your loved ones after you pass away. Working with a California advanced estate planning lawyer can ensure that your estate plan is not only beneficial for your family but also benefits you while you are alive.
When you start estate planning, your attorney will assess your situation. You and your attorney will figure out what works best for your individual circumstances and what tactics will help you and your loved ones the most.
Some estate planning tactics you can use to protect your estate from taxes may include forming an irrevocable trust. Irrevocable trusts come in many forms and have varying benefits for you and your family. You can even benefit from certain trusts under certain conditions while you are alive, which is a huge boon when planning your estate.
Speaking of gifts, you can also choose to give gifts valued under the annual limit of $19,000 per person per year without exceeding your lifetime limit of $13.99 million. This allows you to give tax-free gifts to your loved ones, shrink the amount of assets that will be divvied up in your estate plan, and even avoid probate court to an extent.
There are many benefits to solid estate planning, and minimizing the impact of taxes on your estate is a big one.
What Else is Involved with Advanced Estate Planning?
Advanced estate planning helps you protect your assets, minimize taxes, lessen the impact of probate, and instruct your family regarding your medical wishes.
At the end of the day, advanced estate planning is all about an easy transition with minimal guesswork. Distributing your assets and property to your loved ones in the easiest way possible so that they can concentrate on grieving and not on taxes, distribution of your estate, or how you would have wanted other manners handled.
This is done using several advanced estate planning services, including:
- Creating a comprehensive will
- Creating an advanced medical directive
- Creating one or more trusts to manage the assets you would like distributed to your family
- Structuring the transition of your business and business interests
Let’s take a quick look at what each of these means for you and your family. You can find more in-depth explanations here.
What is a Will?
While a will is not necessarily a part of advanced estate planning, it is still an important part of your estate plan. Your last will outlines many of your final wishes. In your will, you will name an executor, the person who will administer your estate. This can be a stressful, very involved job, so make sure your executor is up to the task.
You will also name guardianship for your minor children should you or both parents pass before they are adults. This allows you to pick a trusted person to care for your children in your absence.
Having a comprehensive will does not affect the tax impact on your estate, but it can make the probate process much easier for your family.
What is an Advance Directive?
While a will is a common part of estate planning that is not necessarily a part of advanced estate planning, an advance directive is common to both.
Your advance directive is a guidebook for your family should you suddenly become unable to make decisions for yourself, either through incapacitation or death. Your advance directive allows you to outline what medical treatments you are comfortable with receiving and which treatments you would like to avoid. You can name a medical power of attorney, an agent that can act on your behalf, making important healthcare decisions for you that align with your wishes.
Your advance directive covers many important factors regarding you and your health care directives. It allows you to take some of the stress off of your family and ensure you are getting the care that you need as long as it aligns with your wishes.
How do Trusts Factor into Advanced Estate Planning?
Trusts are an invaluable tool you can use to lessen the tax impact on your estate. The awesome thing about trusts is when managed properly, they can offer you many benefits while you are alive, and those benefits may extend to your family when you pass. There are many kinds of trusts, but they boil down to the big two; revocable trusts, and irrevocable trusts.
Revocable Trust
A revocable trust allows you to transfer assets and property to the trust with strict instructions on how the trust assets are to be managed and eventually distributed. A revocable trust can be modified and even dissolved once it is formed and assets placed within it. This means you still have control over your assets and can choose to add to or remove assets from the trust.
A trust is valuable to estate planning because the assets within a trust are more private than assets in your estate that must go through probate. It allows your beneficiaries to benefit from the trust faster than they would benefit from anything that has to go through probate.
Revocable trusts do not offer tax benefits while you are alive, but they may offer some tax breaks once you pass away.
Irrevocable Trust
An irrevocable trust is a more strict version of a revocable trust. Once you create an irrevocable trust and begin transferring assets to it, you cannot then change the trust, nor can you easily dissolve it without the permission of all beneficiaries listed in the trust.
So, why would you want to go with an irrevocable trust over a revocable one?
An irrevocable trust offers many estate planning benefits that a revocable trust does not. You can expect certain asset protection from creditors for certain assets in the trust. There are potential tax benefits you can expect with certain, well-managed, irrevocable trusts.
However, the biggest downfall of an irrevocable trust versus a revocable one is the loss of flexibility. Once you go through forming one and transferring assets, then you lose the flexibility to govern your assets. If this flexibility is imperative to you, and you don’t think you will benefit from the greater asset protection offered by an irrevocable trust, then going with a revocable living trust may be more in alignment with your needs.
How Do You Plan for Transferring Business Interests?
If you gained your wealth through the hard work and endeavors of your own business, then you likely want to keep that business in your family, even after you pass away. There are plenty of reasons to assess your business interests when creating an estate plan. The biggest incentive is ensuring the smooth transition of ownership, creating as little interruption to business as possible.
Your estate plan should include a clear succession plan for the person or people you would like to assume your role once you pass away. A succession plan ensures your business isn’t left captainless should you pass away, along with your first successor.
Planning the succession of your business can also help lessen the impact of taxes your successor and your family face. There are some tax benefits offered as long as the inheritor of your business continues its operation for a certain amount of time.
How Can Advance Estate Planning Attorneys Help?
If you are feeling a little lost with all of this new information, let us assure you that that is completely normal!
A knowledgeable lawyer can help guide you through this process from start to finish. Estate planning attorneys help with all facets of creating a solid estate plan, from helping you form a comprehensive will, an advance directive, forming a trust or multiple trusts, and other strategies.
Your qualified attorney will not only bring a multi-layered approach as you form your estate plan but can also help your family after you pass with things like executor duties and other complicated administration tasks.
An estate planning attorney can answer all of your questions and ensure your estate plan serves your well-being while you are alive and for your family after you are gone.
Secure Your Legacy: Minimize Estate Taxes with a California Estate Planning Lawyer
A skilled and knowledgeable estate planning lawyer serving California can also help you formulate plans to minimize these sometimes excessive taxes. The laws and taxes surrounding estate planning are exceptionally complex and change from year to year. You should not have to worry about whether your family receives the benefit of your hard work over your lifetime.
At the Singh Law Firm, we believe that you should not have your savings taxed away from you and your loved ones. We have helped over 1,000 clients create advanced estate plans that protect their assets for the next generation and beyond. Call our firm today and take the first step towards securing your assets and protecting your legacy.