When dealing with estate planning concerns, it's easy to focus on the idea that you want to see that certain items or certain amounts of money go to particular people or organizations. Along the way, though, that can leave you and others in situations where the tax implications may undermine your overall intentions. Let's take a look at some of the ways that tax services work and estate planning overlap.
Unpaid Taxes on Your Part
The old saying about death and taxes is truer than you think. When you die, the government still expects your estate to settle up on your remaining taxes. Before a single dime of your estate is doled out to anyone you care about, there will be the business of concluding any of your remaining tax obligations. A property estate planning effort always addresses these challenges first.
Unpayable Taxes for Beneficiaries
Leaving someone you care about an amazing bequeathal, such as a gorgeous summer house, can feel at the time like you're doing something wonderful for them. Unfortunately, the acquisition of that property is likely to be accompanied by local, state and federal taxes. What seems like a fabulous gift can quickly become a white elephant if they don't have the kind of money sitting around to pay the tax bill. If you mean to keep a property in the family, for example, you'll also need to see that there will be enough funds in the estate to pay the tax bills into the future.
Vehicles for Addressing Tax Issues
Trusts and estates are vehicles that often go hand-in-hand, especially when it comes to coping with taxes. You might, for example, want to give a large amount of money to a local charity. In many instances, folks set up trusts to reduce the tax bill and see that more of their money ends up going to the causes they care about.
Funding the Estate Itself
Putting back money in the estate planning process is critical. It's hard to know when you're setting up an estate exactly what the tax environment will be at the time of your passing. For this reason, it's prudent to overfund the account and be absolutely sure that your taxes and those of your beneficiaries will be paid in full. Make sure that when all that is done, though, to empower the administrator of your estate to then disburse any remaining funds.
For more information, talk to a tax services professional.