Estate planning refers to the legal structuring of the future disposition of one’s current and projected assets. It is a NEED for both the affluent and the middle class. Once substantial assets and net worth are achieved, planning on how these should be transferred (in case of death) to the heirs should be made in advance. It is essential to control the disposition of these assets and to minimize the taxes imposed by both the state and federal governments.
While completely eliminating estate taxes may be difficult, it is possible. This involves a thorough analysis of the assets being considered and requires expert strategies from financial planners. At the most basic level, estate plans may involve credit-shelter trusts, traditional life insurance, and similar instruments. The “death benefit” in life insurance, which is completely tax-free and easily accessible by the beneficiaries, can be used to pay the estate tax.
Because clients have different types of assets under their portfolio, some more sophisticated approaches to wealth transfer may be needed. Foreign grantor trusts, private dynasty trusts, placement life insurance, mutual funds, and some types of leveraged gifting are less simple than an ordinary life insurance, but they work from both an income and transfer tax perspective and allow the client to achieve his or her personal goals.
Linda O. Foster provides federal employees of all ages with both sound advice on retirement and estate planning and economical, tax-advantaged investments to help them reach their financial goals and enhance their retirement plans. To know more about her, visit this LinkedIn page.