Estate taxes can take a significant portion of the assets you intend to leave your loved ones. The larger your estate, the greater the impact taxes can have. As such, it helps to do what you can to reduce the tax burden when the time comes.
Texas does not have estate taxes, but you could be subject to federal taxes. Here are some strategies to help you protect more of your estate and pass on what you have worked so hard to build.
Give gifts during your lifetime
Giving gifts reduces the size of your taxable estate and is an effective way to reduce your estate taxes. However, be wary of triggering federal gift taxes if you give away too much and exceed the IRS threshold, which can be counterproductive.
Set up an irrevocable trust
Assets in an irrevocable trust are not counted as part of your estate when calculating your taxes. In other words, they are not part of your taxable estate. Irrevocable trusts can be invaluable estate planning tools, but learning more about how they work is crucial. For instance, you will have to transfer your ownership and control of your assets to the trust.
Explore charitable contributions
Donating some assets to charity can help reduce the size of your estate, which means fewer taxes. You also get to support causes you care about. Additionally, you can continue receiving income from the assets you intend to donate using charitable trusts.
Estate tax laws can be complicated, and the best strategies for reducing taxes will depend on your specific financial situation, assets and long-term goals. Seeking legal guidance can help you navigate the intricacies and create a personalized plan that minimizes estate taxes and maximizes what you pass on to loved ones.