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Navigating the tax code after death

With recent budget constraints in Washington, all eyes are on modified requirements for estate planning. National lawmakers have recently made changes to the tax code that could affect your ability to pass on your Florida assets to your children or other beneficiaries. In the modern era of overly aggressive taxation, those seeking estate planning services must carefully navigate government requirements.

One of the most common pitfalls among American estate plans is that of the estate tax marital deduction. That is, if one spouse dies, he or she can leave all assets to the surviving spouse without any tax benefits. This is a great situation in the short-term, but what happens when the remaining spouse perishes? Widows and widowers now have special tax considerations that will apply to the way they distribute their property.

Some estate planners would have you simply give away portions of your estate. That can be a feasible plan, until you consider the gift tax, which is applied when an individual gives away an asset that is higher than a certain value. Modern estate planners know that one of the best ways to avoid taxation is actually to lessen the value of the gift, therefore allowing it to be handed down without any penalty. This can be accomplished in a variety of ways.

First, clients can consider moving business assets into a family limited partnership (FLP). This move allows individuals to distribute their interests in a business to their relatives without paying gift tax, as long as the gifts add up to less than $5.25 million annually. Individuals can also create irrevocable trusts known as grantor retain annuity trusts (GRAT), which allow parents to transfer income-producing assets to their children without penalty.

Navigating the tax code and building a comprehensive estate plan is not always easy. In fact, many tax planning tools may be eliminated by legislators in order to increase the nation's tax base. Individuals and business owners may not be aware of their legal rights after death. Probate attorneys can provide additional information to help build an estate plan that will provide maximum benefit to your heirs.

Source: www.lifehealthpro.com, "Endangered estate planning tools? At least we still have life insurance" Louis S. Shuntich, Aug. 19, 2013