Reducing Taxes
Believe it or not, to protect your family and loved ones, you will need to concern yourself with the issue of taxes after your death. Primarily, you will want to focus on income taxes and estate taxes, but there are also gift and generation-skipping taxes if you leave a bequest to your grandchildren.
Avoiding probate does not mean you won't owe income, gift, generation-skipping, state, or estate taxes. You might owe any or all of those taxes depending on your plan and the size of your estate.
The rules about income taxes on property that is received by someone when you die are very tricky. One small mistake can cost your family thousands of dollars, and perhaps hundreds of thousands. The rules about what property is subject to income tax and how you can reduce or eliminate that tax by owning your property in a different way are complicated but rewarding. Don't panic; you will learn these income tax rules and get tips on how you might create a plan to minimize the income tax consequences to your family and in many cases even eliminate income taxes on inherited property.
The laws about taxes that are owed on your estate are complex. But like most topics that are complex, if the presentation is broken down into bite-sized pieces and you are given examples about how each piece works, you can understand estate taxes and create a plan to minimize those taxes or avoid them altogether.
If you hire a lawyer to draft documents to eliminate or reduce the federal estate taxes, you may pay what you consider to be substantial lawyer's fees in the process. But when you are organized and understand the tax rules yourself, you can reduce the time and expense of a lawyer. You will more than likely reduce expenses for your family, and you will be reassured that your plan is properly executed.
When you understand how you need to prepare — the decisions you need to make and the possible solutions — it reduces the cost of having to get something fixed. Each chapter in this book is designed to teach you rules that would cost $250 to $300, or more, per hour to learn from a lawyer. Even if or when you hire a lawyer to prepare your documents, being educated will save an enormous amount of time and money.
