Like the old saying goes, there are only two certainties in life—death and taxes. Through effective estate planning, you can prepare for the future and address these two very important issues, as difficult as they may be and as little as you’d like to think about them on a daily basis.
A comprehensive estate plan allows you to avoid most of the common challenges family and friends of the deceased face immediately after someone passes away. These issues are most often associated with the following:
Especially for wealthy individuals, it’s important to engage in this planning process to avoid unnecessary and costly estate taxes upon your death. If not addressed ahead of time, the federal government may take a significant portion of your estate away from your loved ones and beneficiaries.
To help reduce these taxes, you may choose to gift certain assets directly to your heirs, charitable organizations or a trust, which will disperse the assets to your chosen beneficiaries at a time you see fit—such as after you pass away. You may also wish to gift some or all of the interests in a closely held business, such as a limited liability company (LLC) or a corporation. By doing so, you essentially decrease the value of your estate because you no longer own the assets in question, reducing estate tax liabilities in the process.
For business owners and wealthy individuals, the threat of a potential lawsuit or divorce can be significant. Advanced estate planning strategies, including spousal lifetime access trusts and other mechanisms, protect assets and property from any threats that could arise in the future. There are also some offshore trusts and asset protection trusts that are formed specifically to keep assets out of the hands of divorced spouses and creditors. You may also gift assets through a family-owned LLC, which provides another level of protection for you and your loved ones.
In addition to eliminating or reducing estate taxes and protecting assets, your estate plan can also help create an ongoing legacy that lasts for the generations that come after you. It’s possible to set up trusts that last for more than 100 years into the future, establishing dynasty trusts for future family members. Another common example is the establishment of a charitable trust or private foundation that will continue to receive endowments from your estate many years down the line.
There’s no doubt about it—estate planning is absolutely critical toward minimizing estate taxes, protecting your beneficiaries and ensuring your legacy lives on after you pass away. Work with a skilled estate planning attorney to learn more about your options and to set up a plan that meets your specific needs and circumstances.
BoltNagi is a well-established and widely respected estate planning law firm serving individuals and businesses throughout the U.S. Virgin Islands.