Taxes are everywhere. Governments need a lot of money, and these sums are impossible to imagine for the average citizen. If you haven’t started thinking about it, just take a look at one of the multiple inheritance tax calculators available on the Internet. Fill in the value of the property and savings that you inherit. Once you see the sum, you’ll be shocked.
The taxes will consume a huge portion of the property and savings of your parents or close ones. That’s why you better start thinking of protecting them right now before you lose a significant amount of these assets’ value. There are many ways to do it, and in this article, you’ll get to know five best ways.
Will
Connotations of this word are not necessarily pleasant, and you’d rather not think about it. Unfortunately, this document is very crucial from the financial point of view, especially considering how long probate can take. Making a will is a guarantee that all the assets will be split according to one’s will. If the property is owned jointly, there won’t be any problems. However, some of the situations are complicated and confusing.
You might be in charge of splitting the inherited assets, and it’s a very daunting task. You can either do it on your own or use the services of professional companies, for example, Probate Advance. They will help you with all the formalities, and guide you throughout the process; however, you’ll have to pay for their services. If you don’t want to be bothered with such issues during that hard time, it might be worth using services of probate companies, but keep in mind that you can save some money if you do it on your own.
Stay below the inheritance tax threshold
If the property and other savings are below a certain threshold, you’ll be able to avoid paying the taxes. When it comes to the US, the estate tax can be up to 40% of the total value. It only applies when assets are higher than $11.58 million. This sum is valid in 2020; however, keep in mind that it can change, so always make sure to double-check what the current threshold is.
Assets giveaway
Another way to “trick” the government is to give away the assets. It has to be done seven years before the death, though. If you or your relative live longer than that, all the assets that were given away are free and are not subject to tax. If one is planning to do it, but they die within seven years, the tax amount is reduced. Notice that there are certain possibilities to gift money, and avoid the tax. It can be, for instance, a child’s wedding. Also, a certain gift sum is tax-free, but it frequently changes, so you should always check what’s the valid sum at a time. For 2019 it was $15,000.
Assets giveaway is very beneficial because of two reasons. It’s an immediate benefit for you or your loved ones, and at the same time, it’s a reduction of the estate amount. It might be especially important if you are close to the inheritance tax threshold.
Put inheritance into a trust
It’s not always possible to determine, but if your parents or other family members are, for example, lethally ill, you can talk to them about putting their assets into a trust. It’s never an easy talk, but thanks to that, you, as a beneficiary, won’t have to worry about going through probate. Trusts are very similar to wills, and they will let you avoid state probate requirements and all the connected expenses.
Spend some of the assets
Saving is essential and praiseworthy. But, why would your loved ones keep it all, knowing that tax severely hits all the beneficiaries, including you? 40% is a lot, and there’s one more simple solution to avoid the tax – spend the excess amount of money. Your parents, or loved ones, were working so hard for the savings of their life. That’s why they deserve to have a reward for it. Finally, it’s time to compensate for all the sacrifices they had to commit. Going to a holiday destination that they have always been dreaming of is a great idea. Just like buying a new car, or any other purchase they believe is right. Retirement and being elderly has its disadvantages, but there are as many benefits, contrary to popular belief.
Protecting your inheritance from taxes is very crucial. This is an estate of your parents or loved ones, and they’ve been working for it all their lives. Don’t ruin their hard work, by neglecting the inheritance tax that can consume up to 40% of total assets value. Make sure to use one or more tips from the article, and they will allow you to keep the vast majority of what was assigned to you.
