[COLUMN] The tax benefits of estate planning: A guide by an experienced trust and estate attorney

Estate planning is often viewed through the lens of ensuring that one’s assets are distributed according to their wishes after passing. However, an equally important aspect that merits attention is the potential for significant tax benefits. As an experienced trust and estate attorney, I’ve guided numerous clients through the complexities of estate planning, emphasizing not only the peace of mind it brings but also the financial advantages, particularly in tax savings.

Minimizing estate taxes

One of the primary tax benefits of comprehensive estate planning is the reduction of estate taxes. The federal government levies taxes on the transfer of the estate of a deceased person if the value exceeds certain thresholds. Through strategic planning, such as the use of trusts, individuals can significantly reduce the size of their taxable estate, thereby decreasing or even eliminating estate taxes. For example, irrevocable trusts can be used to remove assets from the estate’s taxable value, offering a dual advantage of asset protection and tax savings.

Gift taxes and lifetime transfers

Another aspect of estate planning that offers tax advantages is the strategic use of gifts. The IRS allows individuals to give a certain amount per year to an unlimited number of people without incurring gift taxes, effectively reducing the size of one’s estate while avoiding the gift tax. Lifetime gifts can also qualify for educational and medical exclusions, further enhancing the tax benefits. By carefully planning these gifts, individuals can transfer substantial wealth to their heirs tax-free.

Generation-Skipping Transfer Tax (GSTT) planning

For those looking to benefit multiple generations, understanding and planning around the Generation-Skipping Transfer Tax (GSTT) is crucial. The GSTT is a tax on transfers to individuals two or more generations below the donor. Through the use of generation-skipping trusts, individuals can pass assets directly to grandchildren or even great-grandchildren, avoiding the taxes that would be incurred if the assets first passed to the intervening generation.

Income tax benefits

Estate planning can also provide income tax benefits. Certain types of trusts, like charitable remainder trusts, allow the grantor to receive a partial tax deduction for the value of the gift to charity, along with potential income for a term of years. Moreover, by carefully selecting which assets to transfer into trusts, individuals can shift income-producing assets into lower tax brackets, reducing overall income tax liability.

State-specific considerations

It’s important to note that estate planning strategies must also take into account state-specific laws and taxes. Some states impose their own estate or inheritance taxes, with thresholds that can be significantly lower than the federal exemption. Proper planning with a knowledgeable attorney can help navigate these variances, ensuring optimal tax efficiency across both federal and state levels.

Estate planning offers more than just the orderly distribution of assets after one’s passing. It presents a critical opportunity to minimize tax liabilities, ensuring that more of one’s hard-earned assets are passed on to their loved ones. By engaging in thorough estate planning with an experienced attorney, individuals can achieve both peace of mind and substantial tax benefits.

* * *

The opinions, beliefs and viewpoints expressed by the author do not necessarily reflect the opinions, beliefs and viewpoints of Asian Journal, its management, editorial board and staff.

* * *

Atty. Marivel Zialcita has been an attorney for over 20 years and is the founder of MMZ Law, A Professional Corporation. Atty. Zialcita is a frequent speaker on trust and estate matters for the National Business Institute and contributing editor to Continuing Education of the Bar. She currently sits on the Board for her alma mater, California Western School of Law Alumni Board, the Estate Planning Council of Pomona Valley, and Aging Next. In 2018, Atty. Zialcita brought in Atty. Soo Myland as Partner at MMZ Law. MMZ Law offers a variety of services which includes trust and estate, elder law, Medi-Cal asset protection planning, veterans’ affairs benefits, conservatorship, special needs, trust administration, and probate. To contact MMZ Law, call (909) 256-6702. Visit www.mmzlawyer.com for more details. None of the information presented above should be considered as establishment of a lawyer-client relationship and is not intended to give legal advice for specific situations.

               (Advertising Supplement)


The Filipino-American Community Newspaper. Your News. Your Community. Your Journal. Since 1991.

Copyright © 1991-2024 Asian Journal Media Group.
All Rights Reserved.