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4 ways estate planning can minimize future tax burdens

On Behalf of | Jan 20, 2024 | Estate Planning

When it comes to ensuring a smooth transition of wealth to your loved ones, estate planning plays an important role.

Thoughtful estate planning not only ensures the distribution of assets according to your wishes but also helps minimize the tax burden on your heirs.

1. Utilize the unified credit

Maryland, like other states, imposes estate taxes on larger estates. However, by leveraging the Unified Credit, you can minimize the impact of these taxes. The Unified Credit allows you to offset a certain amount of your estate’s value from taxation. Properly using this credit can significantly reduce the tax burden on your loved ones.

2. Establish trusts wisely

Creating trusts is a strategic way to protect your assets and minimize tax liabilities. Various trust options, such as revocable and irrevocable trusts, provide flexibility in managing your estate. By carefully structuring trusts, you can ensure the efficient distribution of your assets with minimal tax consequences for your heirs.

3. Gift strategically

Gifting can be a powerful tool in estate planning. By strategically gifting assets during your lifetime, you can reduce the overall value of your estate. This, in turn, lowers the potential tax burden on your loved ones. Understanding and adhering to regulations on gifting is important for optimizing this strategy. For 2024, the IRS increased the giftable amount to $18,000 per donee.

4. Regularly review and update your plan

Estate planning is not a one-time task. Maryland’s tax laws may change, and your personal circumstances may evolve. Regularly reviewing and updating your estate plan ensures that it aligns with your goals and takes advantage of any new opportunities.

By employing practical strategies, you can enhance the effectiveness of your estate plan, providing both financial security and peace of mind for your heirs.