Are you going to be writing your will soon?
This is likely to be an emotive time, and there is one key area that needs to be considered. The role that taxes will play in the inheritance that your loved ones receive.
This is why it is usually wise to consult with either a financial or tax planner when you are writing your will. If you have a complex estate or simply want to simplify the process of finance in your will, here are four reasons to talk to these professionals when drawing up this document.
1. Minimise Estate Taxes
A key reason to hire a financial & tax planner when you are writing your will is to ensure that any estate taxes are minimal.
At the time of writing, in the US, federal estate taxes in the US are charged on a scale of 18-40%, provided that the estate is worth more than the tax threshold. So, if you are lucky enough to have an estate worth more than $13.6 million in 2024, there are ways you can still reduce the taxes that will be levied when you pass. Just contact a tax planner to help you do so effectively!
2. Help With Wealth Distribution
It seems simple enough; divide your assets based on how many children or grandchildren you have.
However, depending on the size of your estate, taxes will still be charged, meaning that they may not receive the amount you wanted them to. A tax planner will help you structure the distribution of your assets to minimize the amount of tax that you and your loved ones will need to pay. For instance, they may recommend setting up a trust for those under the age of 18 in your family, which will ensure that all of the money is tax-exempt.
3. Ensure Tax Law Compliance
Irrespective of where you live, inheritance tax law is complicated, especially if it goes into the area of probate.
So, when you are drawing up your will, by hiring an expert to assist, you can be sure that the document will conform to all the legal requirements in your state, preventing penalties to your estate (and loved ones) when you pass.
4. Assist With Passing Down Retirement Accounts
Many people, in preparation for retirement, set up a 401(k) account or a HSA account, to maximize the contributions to their pensions, and to minimize taxes that are placed when they pass away. However, these accounts often come with specific tax implications, which can make it tricky to ensure that all of the money in the account will be passed on when you pass away. A tax planner will be able to offer you guidance in this area, by looking into strategies such as rolling over accounts or converting them in advance to Roth IRAs. This will stop tax burdens on your beneficiaries and will also give you peace of mind.
