5 Ways to Eliminate Your Estate Taxes

1. Annual Gifts
A person can make a monetary gift annually to another person, usually a child or grandchild, of up to $12,000 per year without having to pay a gift tax. If a husband and wife each give this amount per year, they are giving $24,000 per child or grandchild without having to pay a gift tax on the sum. The total amount that is given away is deducted off of the estate value. If the end estate value is less than $600,000, it is exempt from estate taxes.

2. Probate-Avoidance Trust
The Probate-Avoidance Trust is for people who have an estate valued under $600,000. This allows the person to avoid probate and estate taxes since the estate is exempt from this kind of tax.

3. AB Trusts
An AB Trust is designed to double the exemption amount for any given year of death. It is a very common way to avoid probate and estate taxes for people with an estate valued over $600,000. A married couple enters an AB Trust with naming a final beneficiary, usually a child or grandchild. If one spouse dies, half of the property is transferred to the final beneficiary while the other spouse still has rights to the property and any income that is generated for the remainder of their life. Once the second spouse dies, the other half of the property is transferred to the final beneficiary without incurring any estate tax.

4. QTIP Trust
A QTIP trust is best for those who have children from different marriages. This type of trust ensures that the living spouse, who must be a citizen, is financially taken care of for the remainder of their life without the interference from the deceased spouse’s children from a different marriage. At the death of the second spouse, the assets are passed to the beneficiaries of choice, such as children from the first marriage. This type of trust provides flexibility in estate tax planning.

5. Charitable Trusts
Charitable trusts are a way to get a large tax reduction by giving generously to a charity. Once a charity trust is set up and operational, it is irrevocable and the person who set up the trust cannot regain control. The charity becomes the trustee and any assets that are transferred into the trust are managed by the charity in order to generate income. They pay the person a portion of the income generated for a specific amount of time and when the person dies, the charity gains possession of the assets listed in the trust. The estate will not be subject to estate tax since it will be in the possession of the charity.

Before making any decisions about your estate plan, Walters and Ward advises you to speak with an experienced attorney. We can help you decide what will work best in your situation.