However, when it comes to transferring wealth, there are a number of considerations to keep in mind to better ensure that the wealth you’ve carefully built over the years is transferred to your loved ones as efficiently as possible. While there may not be a way to eliminate taxes and fees in making any transfers, there are certain actions you can take to limit them.
If you have questions about how to transfer wealth while limiting taxes and fees, look no further than Beller Law, P.L. Use our guide below to learn more about some wealth transfer strategies that may be available to you and see how our team can help you move forward today.
Wealth Transfer Strategies: Minimizing Taxes and Fees
Wealth transfers can happen in two primary ways: (1) during the grantor’s lifetime, or (2) at the time of the grantor’s death through an inheritance. The taxes and fees on any transfers will vary depending on when you make such transfers, the amount and type of transfer, and other factors.
Those looking to minimize taxes and fees in transferring wealth to their loved ones have a few options. We will discuss some of the most common wealth transfer strategies below.
Note, however, that not all strategies make sense for all individuals and may vary depending on your goals and financial circumstances. Thus, discuss your situation with an experienced wealth management attorney before deciding whether and how to proceed.
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Trusts
A trust is an extremely valuable estate planning tool that can provide both tax advantages and reduced fees for the transferee.
When someone passes away without a trust in place, the beneficiaries of the deceased will have to go through probate proceedings. Probate is the legal process by which the court administers the deceased’s estate after death and transfers their assets to their inheritors.
Even if someone dies with a last will and testament in place, the parties may nevertheless need to go through the probate process. Thus, regardless of whether or not a will exists, probate proceedings can be costly due to court filing fees, administration costs, and other expenses. All of these things can cut significantly into any inheritance you may have planned to pass on to your loved ones.
However, one of the primary benefits of a validly executed and funded trust is the ability to avoid the probate process. This can allow you to avoid the costs and expenses associated with probate proceedings as well, which will ultimately leave more of your wealth to the individuals you set it aside for.
Additionally, certain types of trust may also afford tax advantages. For more information on implementing strategies to maximize your tax savings through the use of a trust, give us a call to speak with one of our highly-skilled attorneys.
- Annual Gifting
Another way to limit your tax liability in wealth transfers is through strategic annual gifting. Specifically, as of 2023, individuals can make gifts of up to $17,000 per year per donee without incurring any federal gift tax liability. This is known as the annual gift tax exclusion.
By giving the maximum amount each year, you can maximize the value to your loved ones by significantly limiting the tax implications that might attach if you waited to bequeath the property through your will.
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Qualified College Savings Plans
Another valuable tax-saving strategy is the use of 529 tax-advantaged savings plans, commonly referred to as “qualified tuition plans.” A 529 savings plan allows you to contribute directly to a savings plan set aside specifically for the higher education of a child. This is a great way to limit tax liability while also taking early steps toward furthering the future education of your children.
Contributions to a qualifying 529 plan are generally considered to be completed gifts to a student. Thus, contributions up to the applicable limits are not subject to federal gift tax. Additionally, any withdrawals are typically tax-free so long as the funds are used on qualifying expenses such as tuition and other related fees.
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Direct Payment of Certain Expenses
Additionally, there are certain exceptions to the annual gift tax amount that may allow you to avoid taxation on certain qualified transfers. For example, any amounts paid on behalf of another individual for their education or medical care are exempt from the annual gift tax exclusion limit. Thus, such payments can be made tax-free and will also not count toward your $17,000 (for 2023) per donee per year.
These are certainly not the only wealth transfer strategies available to those looking to limit their fees and tax liability. However, we hope this gives you a place to start as you begin planning for your future and that of the ones you love most.
Learn More About Tax-Efficient Wealth Transfer Strategies Today
At Beller Law, P.L., our premier Florida wealth management attorneys have extensive experience assisting clients with a variety of estate planning needs. We recognize the importance of having a clear plan in place to help protect your assets and other financial interests, mitigate tax liabilities, and ensure that your loved ones are taken care of when you are no longer here to care for them yourself.
We have decades of experience guiding and counseling our estate planning clients, and we are confident that we have the knowledge, background, and experience necessary to help you, too. It’s never too early to start planning for your future, so don’t wait—give us a call today to discuss your goals and see what Beller Law, P.L. can do for you.