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You can legally reduce your taxable income by transferring a portion of your assets to one or more beneficiaries. Federal law excludes you from having to file a gift tax return when you give up to $15,000 to one person or up to $30,000 to a married couple. The legal term for this is annual exclusion. Professional financial planning can help you leverage sophisticated gifting techniques to provide yourself or your heirs with ongoing income or contribute to your child’s higher education.

Transfer Your Wealth by Setting Up a Trust

Your beneficiaries can avoid probate and reduce taxes on your estate after your death if you transfer money into one of the following trusts:

  • Irrevocable Gift Trust: This trust gives your designated beneficiaries access to gifted funds from the time of your death until they reach an age pre-determined by you.
  • Life Insurance Trusts: You do not have to include the death benefit associated with your life insurance policy in your estate when you establish this type of trust.
  • Revocable Living Trusts: A revocable living trust provides you with a more efficient process of transferring your wealth to your heirs. However, your wealth is still part of your taxable estate.

Create a Will and Name Beneficiaries to Distribute Your Wealth

If you pass away and don’t have a will, the state takes over the distribution of your assets. The only way to ensure that others follow your wishes after your death is to work with a financial advisor to establish gifting and wealth transfer protocols. Anyone over age 18 of sound mind can create a will. Two or more people must sign and witness it for it to be valid.

Professional financial planning can also assist you with making sure that your annuities, life insurance policies, retirement savings accounts, and any other investments reflect your desired beneficiary. If you haven’t updated your beneficiary information in a while, your policies could be payable to someone who has already passed away. The state would take over wealth distribution in this case. Since you obviously want to avoid this, scheduling a meeting with a financial planner while you’re still in good health is an excellent idea. Please contact us today.