Top Ten Tips for Estate Tax Planning

Having a will is a great start, but it is not an estate plan. It’s an important distinction!

If you’ve got a will, that’s great. But if you’ve got a will that is not part of a larger plan to minimize estate taxes and you don’t have other important documents, like powers of attorney or healthcare proxy, then you and your heirs are missing out on important tools to protect you. A recent article in The Naples Daily News, “Tax Secrets: Top 10 tips for winning the estate tax game,” offers some excellent tips on taxes.

  1. Don’t keep property in joint tenancy.
  2. Don’t put money in a pension or IRA, if you’re rich or likely to become rich (in the highest income tax and estate tax bracket). Qualified plans are double taxed up to 64% of your plan funds.
  3. Your wealth transfer plan to legally reduce or eliminate the estate tax should start ASAP.
  4. Don’t put real estate in a corporation. Consider using a family limited partnership or an LLC.
  5. Use a “Retirement Plan Rescue” (RPR), if you have over $300,000 in a qualified plan. This has the power to increase your after-tax dollars by a multiple of 10 or more.
  6. Create an IDT or intentionally defective trust, if you want to make a tax-free transfer of your family-owned business to your kids and remain in control for life.
  7. Do create a FLIP (family limited partnership) for all of your assets, like income-producing real estate, vacant land, and your stock and bond portfolio that is not included in another tool. A FLIP may reduce the value of these assets by 35% for estate tax purposes.
  8. Make sure that all your wealth passes intact to your family.
  9. Make sure that your attorney uses strategies protecting you from creditors and potential lawsuits.
  10. Your estate plan really needs to include two separate pieces. The will component of your estate plan is concerned with distributing your assets in the most tax-effective manner. Your estate plan should also be a plan for your life, with the end goal of maintaining the lifestyle you have worked to build and protecting you, your spouse and your family.

Reference: Naples Daily News (January 7, 2017) “Tax Secrets: Top 10 tips for winning the estate tax game