Tax-Oriented Estate Planning
Prepare for family wealth transfer in Jacksonville
The most pleasing result of wealth acquisition is the privilege to pass it on to future generations. However, careful consideration is required to ensure that your wealth will not be depleted by estate taxes. There are numerous tax-oriented estate planning opportunities available.
Charitable deduction/applicable exclusion planning
Under federal tax law, each individual is allowed to transfer $3.5 million worth of assets free of estate or gift tax. Federal law limits lifetime tax-free gifts to $1 million. The remaining $2.5 million worth of
tax-free transfers must be made upon death.
Fortunately, certain transfers are not subject to federal estate or gift tax. These include:
- Qualified gifts made to one’s spouse
- Gifts to recognized charitable organizations or trusts
- Payments made directly to an accredited educational facility for tuition on behalf of another person
- Payments made directly to a medical care facility for the medical needs of another person
- Transfers which qualify for the annual gift tax exclusion which is an exclusion from gift tax for the first thirteen thousand dollars ($13,000.00) worth of gifts made per year by each donor to each donee provided the gift is of a present interest in property
More sophisticated planning techniques include irrevocable life insurance trusts and charitable remainder trusts.
Irrevocable life insurance trust
Many individuals that have significant wealth do not have sufficient funds or liquid assets to pay the federal estate tax liability which is due nine (9) months after the date of death. Life insurance can provide all or a portion of the funds needed for the payment of taxes, costs of administering the estate or to provide additional resources for loved ones. Without proper planning, insurance can be subject to federal estate tax.
The value of a life insurance policy can be removed from an individual’s taxable estate through the proper use of an irrevocable life insurance trust (ILIT). A life insurance policy can be purchased by the ILIT or an existing policy can be transferred to an ILIT. If an existing policy is transferred to an ILIT and the policyholder dies within three (3) years of the date of the transfer, the proceeds are still included in the policyholder’s taxable estate. Consequently, this technique should be implemented as soon as possible.
Charitable remainders trust
This type of trust allows an individual to make a contribution to a charity but maintain control of an income from the trust assets for life. Other significant benefits may include:
- Avoiding capital gains tax upon the sale of trust assets
- Tax-free diversification of assets
- Gift to charity upon death
- Reduction in federal estate taxes
Todd Watson can assist you in determining whether this type of trust meets your needs.
Generation-skipping trust
Up to $3.5 million worth of assets can be sheltered from generation-skipping tax. Funds placed in this type of trust can pass directly to grandchildren or other generations instead of passing through children first. If properly utilized, an individual’s generation-skipping transfer tax exemption and a generation-skipping trust can make significant wealth available to successive generations completely free of federal estate or generation-skipping transfer taxes.
Proper planning can reduce or eliminate the federal estate tax burden incurred by your heirs.
Let an attorney help you reduce the tax burden on your heirs
For a free telephone appointment with a tax-oriented estate planning lawyer in Jacksonville, contact Todd Watson, Attorney at Law, P.L.
