On April 1, 2014

Estate planners in Colorado, as well as nationwide, are trying to find effective solutions to cope with newly imposed income tax rates. Regardless of the amount of the wealth in question, most U.S. residents are concerned about the raised rates and want ways to alleviate them.

Creating a trust is typically associated with substantial wealth. Various types of trusts are established to protect the members of the family, remaining assets or items of sentimental value. Grantor and simple trusts are often implemented for a variety of reasons. Simple trusts do not burden the beneficiaries with tax payments; whereas, grantor trusts leave the creator of the entity with a significant financial tax responsibility.

An exposure to tax payments greatly depends on the beneficiary’s income bracket. Those with low income may not be required to pay any taxes while receiving the money from the will. Higher income beneficiaries may be expected to pay large sums of money, depending on their annual profits. Municipal bonds may be one of the venues available to estate planners to avoid extreme tax payments. These are typically tax-free securities and are often considered one of the best ways to transfer wealth to the next generations. The American Taxpayer Relief Act originally kicked in for individuals who made more than $400,000 per year, but starting last year, the income threshold was much lower, starting at just below $12,000 for trusts.

Proper understanding of the current tax laws and taxes imposed by the new health care system may be helpful for estate planners when deciding their distribution of wealth after they die. Estate planning concerns can be identified and suitably implemented with the help of a law professional familiar with the estate administration and terms of probation. Proper documentation and evidence exposure may be a great way to obtain amicable agreements between the members of the family, business partners and friends included in the will.

Source: CNBC, “Estate planners shift gears in new tax environment“, Andrew Osterland, March 21, 2014

Categories: Estate Planning

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