With financial and tax regulations constantly changing, it can make it very difficult for someone to have a full grasp of where their estate stands. Every person — and, thus, every estate — is going to be a little different. That’s why it is crucial for people who are looking to address their estate plan to consult an attorney. The advice you get can help you address the intricate matters at play with your estate, allowing you to reach a unique and effective solution to your financial situation.
One of the ways that many people choose to deal with their estate is through trusts. While this option can be very beneficial for some people, trusts have become more difficult to administer in recent years. They simply aren’t as popular, or state laws make it a less viable or enticing option for the estate.
However, an emerging area to watch is income tax. It has always been a part of estate planning, but it is even more important nowadays. With new tax rules taking effect this year, many people who have accrued a lot of wealth and assets (and who earn a substantial income) are at risk for higher tax rates — some of which approach 43 percent. What creative solution is there for avoiding such a high tax rate?
One solution is to give the money to your kids through an intrafamily loan. Your children are almost certainly in a lower tax bracket, and they could use the money to invest it in a number of different areas — with that lower tax bracket taking effect, instead of your much higher one.
Source: Wall Street Journal, “Estate Plans Shift Focus to Income Taxes,” Arden Dale, Sept. 6, 2013
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