It’s tax season, so it’s time to think about taxes and estate planning! Whether you hire a professional or go the DIY route, you’ll likely be collecting documents, crunching numbers, and finding out how much you’ll get (or owe, ugh) within the next few weeks. We all want to keep as much of our hard-earned money as possible, and now is a perfect time to evaluate your tax options for next year—while you have all the details and numbers at your fingertips!
If you have accumulated some wealth, make sure that estate planning is part of this evaluation. Effective estate planning can enable you to keep more of your money (or to give more of it to those you love) when tax time comes around.
But My Taxes Aren’t THAT Bad!
Yes, our lovely state of Virginia does not have a state estate tax. BUT federal estate taxes can still apply if your estate value exceeds the IRS threshold (which changes yearly). You have options to navigate this, but it can be a complicated process and not really one that lends itself to DIY.
Also, the process of transferring assets involves extra taxes—income tax, capital gains tax, etc.—that can reduce the amount of money your loved ones receive from your estate. Planning ahead can minimize these taxes and make sure your heirs get the assets you want them to have.
Taxes and Estate Planning: How to Reduce Your Tax Burden
There are three main ways to reduce the taxes you (or your loved ones) must pay on your accumulated assets:
- Trusts: Placing your assets in a Trust is the best way to protect them from taxation, both during your life and later when the time comes to transfer them to your heirs. Both Revocable and Irrevocable Trusts provide some kind of tax protection, but they differ in several key ways. Take a look at our Estate Planning FAQs to learn more about the types of Trusts and their benefits.
- Gifts: Gifting a certain amount of assets each year allows you to pass wealth to your loved ones tax-free. The IRS sets a maximum amount that can be gifted, and, as long as you adhere to these guidelines, you ensure that your assets are distributed according to your wishes, and your heirs get to keep more of their inheritance.
- Charity: Giving some of your assets to charity—whether individually or as part of a Trust—can make the world a better place while reducing your tax burden. You have the option to extend your legacy into the wider world beyond your immediate family or loved ones, and to make a difference to future generations, while ensuring that more of your money goes towards the things you value.
Update Your Tax-Savings Strategy
As we all know, tax laws change frequently and without warning. A decision that saved you money last year may very well cost you this year. But keeping up with these changes takes time and effort, especially if you have multiple assets or a complex business situation.
Life circumstances can change from year to year, as well. Marriages, divorces, births, deaths—when you experience any of these events, it’s important to re-evaluate your tax situation to make sure that you’re not missing out on savings.
Here’s where Promise Law can help. When you create an estate plan with us, you’ll be eligible to join our PIE™ Estate Plan Maintenance Program, which not only ensures that your estate plan stays aligned with current tax laws, but also gives you the opportunity to update your plan to better reflect your life circumstances and financial goals.
Curious but not Committed?
Estate planning involves more than just taxes; it’s a comprehensive outline of your wealth and wishes, and, in a perfect world, it would align with your values and provide for your loved ones when you no longer can.
The Estate Planning Attorneys at Promise Law understand this, and we love to partner with our clients to make their wishes a reality.
These decisions are important, and we want you to have all the information you need to make them with confidence. That’s why we offer FREE, no obligation LIVE workshops with our Estate Planning Attorneys. We’ll walk you through the basics of creating an estate plan, understanding legal documents, and avoiding planning pitfalls, and we’ll answer the questions that matter the most to you.
In addition, when you attend a workshop, you’ll receive a FREE one-on-one consultation with one of our Virginia Estate Planning Attorneys to discuss your specific situation and financial needs (including taxes)!
Get started today with our on-demand workshop or our monthly in-person workshop. Click here to register.
