Using trusts to reduce estate taxes

On Behalf of | Sep 25, 2018 | Estate Planning

When Nevada residents think about planning for the future, they may be concerned about how estate taxes could affect the beneficiaries of their estates. There are a number of ways that people can help to reduce the tax burden by taking some steps to plan ahead. One of the first steps that many people take is to distribute part of their estate during their lifetime by making gifts. There is a federal lifetime estate and gift tax exemption of approximately $11.2 million dollars, twice that for a married couple. In addition, people can give away up to $15,000 annually to each recipient without needing to pay gift taxes.

By making lifetime gifts, people can reduce the size of their estates and transfer funds in advance. This is a especially good move if the total size of the estate is close to but above the exemption. By removing assets from the estate through lifetime gifts, people can help to eliminate estate taxes for their beneficiaries.

In addition, a charitable lead trust (CLT) can help people transfer more than this $15,000 amount each year. Every year, a CLT will give fixed payments to a designated charity. After a fixed number of years or the trust creator’s death, the remainder will go to the creator’s beneficiaries. In the year the trust is funded, the creator can also claim a tax deduction. Irrevocable trusts are another option that people can use to remove assets from their estate while still maintaining control and use during their lifetime.

There are a number of strategies that people can take to minimize the effect of estate taxes, including life insurance plans and other types of trusts. An estate planning attorney can work with people to make a plan for the future that reflects their wishes and reduces taxes on their beneficiaries.