When you work on your estate plan, chances are, one of your main goals is to figure out how to maximize the amount of wealth you leave behind for your loved ones. While you may want to consider any number of different avenues that may help you accomplish this, one effective method of preserving more of your wealth for future generations involves reducing how much you have to pay in estate tax.
Estate taxes, or those assessed against your estate after your passing, can eat up a sizable portion of the wealth you worked your entire life to amass, but there are some things you can do now to lessen the burden. If you have concerns about estate taxes taking a large percentage of what you hope to leave behind, consider taking these two steps.
Giving away wealth now
Ultimately, the amount of tax assessed against your estate will vary based on your estate's overall value. You can reduce the amount of estate tax assessed against it by giving away some of your wealth now. Maybe you have certain beneficiaries in mind and want to start giving them annual installments of money. Maybe you have charitable interests you would like to donate to ahead of your passing. Both efforts can help reduce the amount of tax assessed against your estate.
Entering assets into a trust
A trust, in simple terms, is a fiduciary arrangement where you retitle assets under a different name and in doing so, gain certain benefits. By placing assets into a trust, you transfer them out of your ownership, so they will not factor in when it comes time to tax your estate.
While you may not be able to “take it with you,” you can still take steps to make sure all the hard work you put into leaving a lasting legacy behind was not in vain. Please also note there are other effective methods of reducing estate tax that exist in addition to those outlined above.