Estate Planning Methods

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You should ensure your family's financial well-being while you are alive and after you pass. Therefore, you should establish the estate plan early in life. Estate planning is not just for rich individuals but for everyone. The estate plan helps you designate people who can handle your business and assets in case of your incapacitation or death. Estate planning ensures that you pass your assets to the beneficiaries without incurring huge estate, gift, income, and other taxes. Therefore, estate planning helps you establish a legacy and protect your assets even after you pass. This article explores a few estate planning methods for you. 


Gifts are a wise choice when you want to escape the taxes on your estate. Suppose the law in your jurisdiction lets you give a gift of up to $1500 without taxation. In that case, you can plan your estate in a way that will enable your beneficiaries to receive the amount annually. Gifts allow you to make statistically significant savings on your taxes since you can gift several people and their children. If you spread the amount over ten years, you can transfer a large amount of your estate to beneficiaries without incurring taxation. The government cannot tax the gift, tax the property you retain, or limit the number of recipients. It would help if you made gifts of the part of your estate that is likely to appreciate over a long period. The beneficiary receives the original amount and the appreciated value. 

Life Insurance

Did you know that your taxable estate includes the proceeds from your life insurance? However, if you transfer the ownership of a life insurance policy to an irrevocable trust, you can avoid the estate taxes. The transfer ensures that the trust owns the proceeds from the life insurance policy. Ensure that your trust has a disposition of the benefits once you pass. One major issue with this alternative is that you have to live three years to make the benefits excludable from your estate. However, the best approach for using this method is to use your trust to buy a life insurance policy. This option allows you to make the application using the trustee's name and escape the three-year restriction. 

Skipping A Generation

Most taxation laws have provisions that prevent you from avoiding estate taxes by skipping one generation. The law requires you to pay generation-skipping taxes for your estate if you skip one generation. However, you can spare a portion of your estate and create a trust for your grandchildren. The amount in the trust grows substantially up to the time of your death. This amount grows further until the grantor distributes it to your grandchildren. Therefore, you can avoid estate taxes by creating a trust when you skip a whole generation and pass your estate to grandchildren. 


No estate plan is complete without considering the viable charity options. The gifts you provide to a qualified charity are exempt from taxation. If you have an asset that appreciates substantially, you can reduce the capital gain taxes by contributing to charitable remainder trusts. You may also give a portion of the asset to the charitable organization and arrange for you or your beneficiaries to receive payouts during your lifetime. Your beneficiaries receive the remainder of the asset after you pass. If you choose this option, ensure all your beneficiaries know your agreement with the selected charity. 

You can minimize the taxes paid on your estate by using estate planning tools like annual gifts, life insurance, generation-skipping trusts, and charity.