The Importance of Wise Tax Counsel
Another big piece of the process in estate planning, can be accounting for fees and taxes that will come due, for example, on release of funds such as IRAs and 401(k)s. If you do not plan accordingly, taxes can take a big bite out of your estate. There are two other taxes directly related to death, estate taxes and inheritance taxes. These taxes can be levied by both state and federal government. Estate taxes are assessed and removed before the estate is split up between the beneficiaries. Inheritance tax however, is taken after the beneficiary receives the inheritance, and becomes their responsibility. Estate tax currently has a rather high threshold, but it is very possible it will lowered with new legislation coming into place. Aside from this, 12 states levy their own additional estate taxes, and 6 states currently impose an inheritance tax. The goal of tax and estate planning is to make a legally enforceable plan, in advance of incapacitation or death, that clearly expresses your desires about who will receive your estate assets and the payment of any debt (including taxes), and doing so in the most efficient and cost-effective manner possible.
Tax issues to pre-plan for:
- Death Tax
- Estate Tax
- Inheritance Tax