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How can I minimize my tax exposure?

On Behalf of | Mar 15, 2023 | Estate Planning, Trusts |

The most frustrating issue about acquiring a wealth of assets and properties is the taxes you must pay when you decide to sell or transfer these. You cannot take your estate with you when you pass; transferring it to your relatives will also subject the properties to estate tax. Fortunately, there are certain strategies you can apply to reduce your taxes.

Consider joint tenancy

Joint property is still subject to estate tax, but you significantly minimize your tax exposure when you share the ownership of the property to two or more persons. When you give your spouse joint tenancy, the government can only tax the share of the deceased’s property. The half of the living spouse is not taxable.

Be aware of federal and gift taxes

As of 2023, the federal estate tax only applies to assets worth over $12,920,000. If your assets are below that, they are not subject to federal estate tax or gift tax. You can consider transferring other assets to a charitable trust to lessen the tax exposure of the total estate. These trusts are popular in Connecticut because it is one of the remaining twelve states with its own state-level estate tax.

Establish a charitable trust

A charitable remainder trust allows you or your beneficiary to earn money from your assets by donating them to charity in the form of a trust. You then get a certain fixed percentage of the market value of the assets you put into that trust. It allows you to lower your exposure to federal estate and gift taxes. Additionally, you will have a philanthropic legacy when you pass.

You can use certain laws on inheritance tax to minimize estate tax, but it is not easy to apply if you do not study it thoroughly enough. Taxes are complex and always changing, so make sure you are ever more mindful of the federal and state laws governing them.