November 29, 2011

Legacy Building Through Estate & Income Tax Planning

First and foremost let us observe that there are legally permissible strategies that enable us all, if we so choose, to reduce the amount of taxes we owe to our state and/or federal government.  As with all other laws, the tax code is a highly politically-charged creation and subject to frequent and widespread changes.  Depending on the particular political administration and congressional makeup of any given time, the way the taxes collected will be used also vary widely.  If we choose to have more of a say in how and where our dollars are used, then we can choose to direct our efforts in those directions purposefully and meaningfully to us rather than leave it up to the shifting political winds to scatter our money where they may.



While it may be true that the only two certainties in life are death and taxes, paying the full amount of taxes without using lawful means to redirect our money where we might prefer is completely voluntary and made possible through a total lack of inaction on our part.  With a minimum expenditure of time and energy and legal fees totaling but a small fraction of the amount we can save in taxes and redirect, it is possible to provide as fully as possible for our loved ones, create living legacies we can observe and appreciate during our lifetimes, and leave lasting legacies that respect our individual and highly personal values and beliefs.



As I like to explain to my clients who come to me with no estate plan in place yet, what they essentially have is a nice empty lot on which to build.  The first step then is of course creating a solid foundation.  That solid foundation may be a will-based plan for those especially without minor children, very limited assets and no estate tax liability, non-blended families, and no other complicating or special factors to consider.  For those with minor children, blended families, and/or estate taxable estates (in Massachusetts this means having assets, including life insurance, retirement, and home equity, that totals over $1 million dollars), the solid foundational plan may be a fully-funded revocable living trust-based plan instead of a will-based plan.  With either of those in place you'll have a nice home in which to comfortably and securely live.



The next step may be to build an addition, put in a pool, add a guest house or barn or garage (you get the idea!).  Depending on your needs and preferences, there are various additional estate planning techniques available.  Many of those are able to reduce estate taxes payable to both the Commonweakth of Massachusetts as well as to the federal government.  Some techniques, including gifts to charities through certain trusts, can also affect your income taxes.  Your estate planning attorney can work together with your accountant to help identify and propose the best possible options to take advantage of the existing rules to reduce income taxes, reduce estate taxes, and accomplish your overall estate planning goals and help you leave the legacy you want.







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