Plan an estate that avoids large taxes

Although it’s a problem many of us would like to have, owning property worth more than a certain amount at death means that your estate will be taxed-at a rate of 40 percent. Knowing that only 65 percent of your property could end up in your heirs’ hands should be good motivation for you to plan an estate that will avoid the large taxes as much as possible.

In 2014, $5,340,000 is the amount which escapes federal gift and estate taxes.

One way for married couples who are planning now to minimize future estate taxes is to make sure that both persons’ estates will be approximately equal in value.

A financial advisor can assist in determining the most appropriate division. Also, proper use of the tax-free amount can shelter a significant amount of property in each estate, allow the surviving spouse full benefit of the property for life, and transfer the remaining assets to heirs and nonprofit organizations in the future.

If you have thought about providing a meaningful legacy gift to a nonprofit, your will can accomplish that when you no longer need the property. You can shelter estate assets and property from all taxes if they are given to a charitable or educational tax-exempt organization.

Your will can donate the assets outright to such an organization for a full tax deduction or direct that the assets be used to provide income for a spouse or children through a charitable trust. Such a trust earns a partial charitable deduction for your estate and may provide more income over the years than the amount of the gift.

For example, if your will creates a charitable unitrust in the amount of $50,000 to pay 5.5% lifetime income to your children, ages 58 and 62 at your death, the expected total pre-tax income paid to them would be over $99,000.

You can state the purpose for your charitable gift in your will. Even with those gifts that provide lifetime income for your heirs first, you can specify the gift’s purpose. Such options allow you to make the legacy gift that you feel is appropriate and provide support for loved ones at the same time.

That’s good planning.


Deborah Miller, JD is a

Senior Director of Planned Giving West Virginia University Foundation, Inc.