Estate planning is important because it allows individuals to plan for the distribution of their assets in the event of their death. This planning can help to avoid probate, which can be a costly and time-consuming process.
Additionally, estate planning can help to ensure that individuals’ assets are distributed according to their wishes and that their loved ones are provided for in the event of their death.
A Brief About Estate Taxes
Estate tax is a tax levied on the assets of a deceased person. The tax is imposed on the estate’s executor or administrator before the estate can be distributed to the heirs. The estate tax is one of the oldest taxes in the United States, having been first imposed in 1797 to help fund the War of 1812. The tax was later repealed and reimposed several times before being made permanent in 1898.
The estate tax is currently imposed at a rate of 40% on the estate’s value above a specific threshold, currently valued at $5.49 million for individuals and $10.98 million for couples. The tax is typically paid by the estate’s executor from the estate’s assets.
The estate tax is a controversial tax, with some arguing that it is an unfair tax on the assets of the deceased and their heirs. Others argue that the tax is necessary to prevent the accumulation of wealth in a small number of families. The US estate tax is presently scheduled to be repealed in 2025.
In Canada there isn’t an estate tax, however this doesn’t mean that the holdings of the deceased left to the heirs will not be taxed. Taxation laws differ from province to province and consulting with a cross-border estate planner is recommended.
Risks of Estate Planning and Estate Tax Strategies
There are a number of risks associated with estate planning, such as:
- The possibility of it not being carried out as intended.
- The eventuality of it being contested by beneficiaries.
- The potential of it being challenged in court.
- The possibility that it might not be executed properly.
- The scope of it being revoked or modified.
There are several risks associated with estate tax planning, including the possibility that the estate tax will be repealed, the potentiality that the estate tax might be increased, and the eventuality that the IRS could disallow some of the estate tax deductions.
Why a Legal Team is Necessary in Navigating Estate Taxes
A legal team can help you navigate the complex world of estate tax planning and ensure that your wishes are carried out according to the law. They can also help you minimize your tax liability and maximize the value of your estate.
Experienced advisors can help ensure that your estate plan is carried out according to your wishes. They can also help make sure that your assets are distributed in a way that is tax efficient and that your beneficiaries receive what you intended for them to receive.
It is a good idea to get in touch with experienced advisors who can guide you through the process of planning your estate and its future potentials and ownership nitty-gritties so that your family and close ones can benefit from your assets to the maximum extent.