Sooner or later, your family will receive your assets from your estate. Will these assets be transferred in a cost-efficient and tax-efficient manner and be protected?
Though a simple will is an essential start to protecting your assets, additional resources to transfer assets are needed. Your family can be protected from unnecessary taxes by creating an estate plan, which is designed to look at your needs and your overall financial situation and to protect your assets so they can be used for the intentions you wish.
A primary goal of any estate plan is to preserve assets from unnecessary taxes so they can be used in the way you desire. A professional asset manager can assist in developing a plan to avoid unnecessary taxes. The federal estate tax is scheduled to be repealed in 2010; it remains a threat until then. Because of this deadline, the importance of tax planning is being brought to the front burner.
A well-thought-out estate plan will help you avoid the unnecessary taxes that can be placed on a large estate, and your savings could be substantial.
Estate tax laws provide for an unlimited marital deduction when assets pass to a surviving spouse. However, for the surviving spouse’s estate, there is no deduction. When he or she dies, the tax cost could be enormous depending on the size of the estate. This potential tax cost could be eliminated or reduced by setting up planned trusts under your will.
The services of a professional asset manager are important during the settlement of your estate. You want someone who is experienced in matters of distribution and investments and who will execute your plan under the directions you established. Preserving your estate is an important role of the fiduciary, but investment growth will be needed to counter the loss of purchasing power to inflation and to take care of increasing family needs.
The future is uncertain, but your fiduciary has the experience to maintain an investment performance that will attempt to offset those events that affect your estate. The estate plan that you and your asset manager developed will provide the guidelines for the management of your estate.
The capability of providing special needs to family members is an importance benefit of establishing an estate plan. The care of an elderly relative and the education of children and grandchildren are a few examples of what an estate plan can provide.
A trust can also be an instrument to withhold control of their inheritances from your beneficiaries until they reach a certain age. The trustee will follow whatever plan you set out in your trust document.
What about your business? Can unnecessary business taxes be avoided? Yes. By establishing an appropriate estate plan, you can ensure that your closely held business can be transferred without unnecessary taxes. Again the asset manager can help put a plan in place that will accomplish this.
Professional help is essential to make certain you take advantage of available cost savings when you transfer the ownership of your business.
One last point about planning for business succession: Do it now to avoid any unanticipated events.
Joseph Wojcik, CPA, MT, is senior vice president and regional executive for Sky Bank, Stark and Summit counties. Reach him at (330) 258-2360, Akron; (330) 498-4623, Canton.
