How to Get Out of Estate Taxes & Income Taxes Without Moving States
If you do not do any estate planning, your heirs could end up with a hefty estate tax and income tax bill when you die. The estate tax is a tax that is paid based on the total assessed value of your property at death. Income tax may be due on various investments or other assets if they are liquidated and received as cash at your death. Both of these can be avoided without having to move out of your state.
Other People Are Reading
Instructions
-
-
1
Place assets in an irrevocable trust. An irrevocable trust can be used to remove assets from your estate. This can reduce or eliminate your estate taxes. Using an irrevocable life insurance trust, for example, will remove the insurance policy from your estate. Your heirs will not pay estate or income taxes on any amounts received from an irrevocable trust.
-
2
Use life insurance contracts or other tax-sheltered financial products. Roth IRAs, cash-value life insurance and other tax-sheltered financial products avoid income tax altogether, so that you can withdraw money for use during retirement (in the case of Roth IRAs) or for any other reason (in the case of cash-value life insurance).
-
-
3
Reduce the size of your estate by selling off property or making charitable donations. The amount of charitable donations you can make is unlimited, and up to a certain point, depending on your income, you may be able to write a portion of the donation off on your taxes. If you fall under the estate tax threshold, you will not have to pay taxes on charitable donations at all.
-
1
References
- Photo Credit A young woman holding a pen, doing her taxes image by Christopher Meder from Fotolia.com
