Estate Planning: Here’s How To Prepare For The Tax Efficient Passing On Of Your Estate

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As time goes on it’s important to start thinking about how your loved ones will be taken care of in the event of your passing.

Since taxes may affect how much of your estate you pass along to your beneficiaries it’s very important to try and mitigate your tax liability as much as possible. Fortunately there are many ways to do this.

To help guide you, we wanted to share a few estate planning tips that will prepare you for the tax efficient passing on of your estate.

Draw Up A Will

Drawing up a will is highly recommend for anyone who is preparing for their passing, but it’s especially important for individuals with large assets that want to reduce the amount of taxes on their estate.

The main benefit of having a will is you can decide who your assets will be distributed to after your death. If you don’t have a will which designates who gets your assets, a probate court will decide for you. Usually your assets will be distributed to your immediate family.

While this isn’t necessarily bad, it’s not ideal as the courts won’t have your best interests in mind when it comes to tax savings during this process.

In addition to being able to have more control over who your beneficiaries are, you can also avoid the fees that are associated with probate court while they determine the value of your estate and who to distribute your assets to.

Set Up A Trust

If you create a trust to manage your assets it will not be considered part of your estate. This means anything in your trust will not be subject to inheritance taxes.

With a trust you can also control the schedule with which disbursements are made to your beneficiaries which is especially important for large estates that might be subject to more tax liabilities. By dispersing benefits over time you’re reducing the taxes your beneficiaries will pay.

Since there are many types of trusts, each with their own advantages and disadvantages, it’s important to consult with a financial advisor so that they can recommend the best type of trust based on your personal situation.

Keep in mind that trusts are not necessarily best for everyone. If you have a smaller estate the costs associated with setting up a trust may outweigh the benefits you would receive from establishing the trust.

Give Tax Free Gifts

Another way to reduce your tax liability is to give your assets away as gifts. Gifts are tax free for you up to a certain amount and you can give as many gifts as you want to your family and friends to reduce the value of your estate.

The amount that you can give to each person tax free depends on your local laws, for example in the United States you can gift up to $13,000 each year per person. If you are married you can gift twice as much per person.

If you prefer to give a gift to a charity there is no limit to the amount that you can gift.

One thing to note, if you gift more than the amount that is exempt from taxes by law it may be considered a taxable gift. For that reason we recommend consulting with a financial advisor to determine what the limit for tax free gifts are in your country.

Buy Life Insurance

Life insurance policies are another way to ensure that your family receives maximum benefit from your estate upon your passing.

A life insurance policy, when not structured well, can still expose your beneficiaries to tax liabilities however.

For example, if the policy is owned by you and the value of the death benefit puts your estate above the amount that is exempt from estate taxes in your country then the proceeds will be subject to estate taxes.

To avoid estate taxes on your life insurance policy’s death benefit you can have your children own the policy or you can have your trust own the policy. With both of these options the proceeds from the policy are tax free.


As you can see, navigating the estate tax process can be complicated and for that reason it’s very important to consult with a financial advisor to help ensure that you pass as much of your estate as possible along to your family when you pass.

If you have questions about this process or you are interested in learning more about our estate planning services contact us today.