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Common estate tax mistakes and how to avoid them

On Behalf of | Apr 24, 2024 | Estate Planning | 0 comments

Estate taxes can be complex, but with careful planning, you can minimize the tax burden on your estate and ensure your assets get passed on smoothly to your heirs.

By addressing the most common mistakes, you can take control of your estate planning and protect your wealth for future generations.

Not having a will

Did you know that 67% of seniors don’t have a will? Without a will, your assets may not get distributed according to your wishes, and this can lead to higher estate taxes. To avoid this mistake, create a will that clearly outlines what you want done with your assets.

Failing to plan for estate taxes

Many people underestimate the value of their estate and fail to plan for estate taxes accordingly. As you create your estate plan, work with a financial advisor to assess your estate’s value and develop a tax strategy that minimizes your estate taxes.

Not taking advantage of tax-exempt gifts

Each year, you can gift a certain amount to individuals without triggering gift taxes. Retaining your assets may cause you to pay more estate taxes. Give gifts from your assets to reduce the size of your taxable estate.

Ignoring trusts as tax planning tools

Trusts can be powerful tools for estate tax planning, allowing you to transfer assets to beneficiaries while minimizing estate taxes. Explore different types of trusts with your financial advisor to see how they can help you achieve your estate planning goals.

Lack of life insurance planning

Life insurance can provide liquidity to cover estate taxes and other expenses without depleting the value of your estate. Purchase adequate life insurance coverage and integrate the proceeds into your estate plan.

Estate planning can be complex, so develop a comprehensive plan that addresses your future estate tax obligations.