When making your estate plans, the size of your estate is an important consideration you need to have at the back of your mind. It determines the amount of taxes that will apply to your estate.
California does not impose estate taxes before an estate is distributed to the heirs. In addition, beneficiaries are not supposed to pay inheritance tax once they take over an estate. However, the estate is still subject to federal estate taxes which are usually proportional to its size.
For instance, as per the current threshold of $12.06 million, anything beyond that figure will be subject to federal estate taxes. If your estate is sizable, you could have to part with a considerable amount of money.
How will a trust help?
Usually, taxes are levied on the estate. Anything that does not belong to the estate will not be taxed, and this is where trusts come in. If you set up an irrevocable trust and put assets into it, they will no longer be part of the estate since you have legally transferred ownership to the trust.
It means that the size of your estate will be reduced, which means lower taxes. As beneficiaries of the trust, your heirs will still enjoy the proceeds from the assets held in the trust. The trustee will only be responsible for managing the assets to the best of their ability.
Not every trust is right for your needs
Trusts are useful estate planning tools that you should consider having as part of your estate plans. Therefore, it is worthwhile to explore and learn more about the other types of trusts that will work for you and help you achieve your estate plans.
