When creating or updating your estate plan, there are options that could help your beneficiaries reduce taxes and court expenses.
With fewer fees and lower taxes, more of your wealth can pass down to your heirs. Furthermore, you can save your loved ones from the time-consuming hardships of probate.
Shortcuts and avoiding probate
Between the high legal fees and the amount of time spent in court, the probate process in California can be particularly costly. However, you can limit expenses for your heirs by using strategies in your estate plan to keep your assets from going through probate. For instance, you can place various assets in a living trust and name your beneficiary as a successor trustee. Anything from your family home to an investment account can go into a trust. You can also use documents such as deeds to specify that a financial account or piece of property you own should transfer ownership to a named heir upon your death.
Estate planning and taxes
You can also use your estate plan to reduce the taxes your beneficiaries must pay when administering your estate. Federal estate taxes apply to your estate before distribution to your heirs. Placing property in trusts can also protect certain assets from taxation.
Additionally, some people gift funds to loved ones during life to decrease estate taxes. For example, you can give tax-free to relatives and friends up to $16,000 per year. It is also possible to transfer money to your spouse. Finally, charitable donations can reduce your taxable estate.
Legal fees and estate taxes can be major expenses for your beneficiaries. Developing an estate plan and keeping it updated allows you to assist your loved ones after your death.