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Key Estate Planning Strategies Everyone Should Use

Written By: MB Group

You've worked hard to create a nest egg to support your lifestyle and help those closest to you toward their ownestate tax planning goals. However, if you fail to engage in estate tax planning, the inheritance you leave to those you love the most could be given to the wrong person: Uncle Sam. Fortunately, the team at MB Group can help. We offer years of experience helping our clients create tax strategies to protect their wealth. Let's take a closer look at a few of the top estate planning strategies you may be able to use. 

Ensure Thy Will Be Done

While drawing up a will is a very obvious first step, the number of people who do not have a will leaves much cause for concern. According to a 2020 Estate Planning and Wills Study, only 32% of people report they have a will. Out of those who do not have a will, a surprising 30.4% say it's because they do not have enough assets to create a will. Regardless of the number of assets, having a will is a quintessential component of your estate plan. Without a will, your estate will have to go through probate court, which is a process that could result in those you love having to foot a significant bill.

Stay Up to Date on Tax Law Changes

The Tax Cuts and Jobs Act of 2018 had extensive implications, including a substantial increase in the federal estate tax exclusion. And the changes to tax laws serve as an even more important reason to review your tax planning estate. However, it's important to avoid undoing any prior tax planning. Why? Because many of the tax law aspects will return to pre-2018 laws at the end of 2025. In short, one of the most critical estate tax planning strategies is to either familiarize yourself with estate tax laws or to work with an estate tax planning specialist at MB Group. 

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Make Annual Gifts

In 2020, you are eligible to make gifts of up to $15,000 per recipient without ever triggering the gift tax. And if you are married and eligible to split gifts, you may be able to make up to $30,000 per recipient. Any gift to a spouse who is a citizen of the U.S. will not be taxed, regardless of the amount of the gift. In addition, the annual amount that can be gifted to noncitizen spouses without having to pay the gift tax has been increased to $157,000 for 2020.

Review Trust Funding Strategies at Death

Before 2018, most estate plans included credit shelter trust strategies that allowed those who were married to take advantage of federal and state estate tax exclusion. This strategy is often designed so that when the first spouse passes, certain assets will pass through to the credit shelter trust. Then, these assets would flow to the spouse who is surviving. Because of the nature of trusts, the spouse who is surviving never actually takes control of or owns the assets, which means the assets in the trust are never included in the surviving spouse's taxable estate. However, it's important to review your trust funding strategies.

For estates smaller than the latest federal estate tax exclusion amount of $11.598 million, using this strategy could transfer the entire estate to the credit shelter trust, which may limit the surviving spouse's direct access to the funds and flexibility. At the same time, if your state has a state estate tax, passing the entire estate to a credit shelter trust could generate state estate taxes at the death of the first spouse. This could be the case unless the trust language reduces the assets transferred to the lower of the federal or state estate tax exclusion.

Contact MB Group for Estate Tax Planning

If you're looking for estate tax planning solutions, the team at MB Group can help. We specialize in helping our clients minimize their tax liability through strategic estate tax planning.

Contact us today to learn more about how we can help.

Tags: tax planning

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