Would you rather leave your hard earned money to your loved ones or to the tax man? Tax laws can be complicated and convoluted and estate planning is just one of many reasons you need to visit a tax planning attorney. If you find yourself in any of the situations below, be sure to consult with an experienced attorney and save yourself as many tax dollars as possible. Put your hard earned dollars where you want them to go, and not into Uncle Sam’s pocket.
- You are leaving money or assets to loved ones. Whenever you are considering estate planning you should also take into consideration tax implications and visit a tax planning attorney. Tax planning and estate planning go hand in hand and work in tandem to plan for your wealth long-term. By consulting with a tax attorney you can often save yourself taxes on your estate now as well as your beneficiaries when it comes time for them to inherit. In some situations, it is better to gift your estate to your heirs a little at a time while you are still alive. You should also consider your state’s tax laws and how they will impact your estate. If you are creating a will or trust to distribute your assets, consult with a tax planning attorney to maximize the amount your heirs will inherit and minimize estate taxes.
- You want to build a legacy. Leaving part of your wealth behind as a legacy might include creating a scholarship fund or gifting your estate to an educational institution. However you decide to leave your legacy, you need to plan and strategize. You should articulate what your financial goals are and make sure you are using tax laws to maximize benefits and available deductions while achieving those goals. Visit a tax planning attorney and ask for a sound advice.
- You need specialized trusts. If you are considering a charitable trust or want to utilize a specialized trust to improve your estate tax, work with a tax planning attorney. For instance, a charitable remainder trust can be established and your estate and the charity of your choice can both enjoy tax benefits.
A specialized trust could also be used to address the disbursement of your estate for a child that has special needs or has excessive spending habits. Any of these scenarios greatly benefit from a knowledgeable tax attorney.
- You are moving out of state. While it sounds so simple, an out of state move should warrant a visit to a tax attorney. Tax laws vary drastically from state to state and you will want to consult with an expert in your new location to make sure your current plan still makes sense. For instance, according to retirementliving.com, “Many people planning to retire use the presence or absence of a state income tax as a litmus test for a retirement destination. This is a serious miscalculation since higher sales and property taxes can more than offset the lack of a state income tax. The lack of a state income tax doesn’t necessarily ensure a low total tax burden.” A skilled tax attorney can looks at the state’s tax laws and help make sure you are taking advantage of all available deductions and not getting penalized with state tax unnecessarily.
- Life changes happen, whether by choice or unexpectedly. Hopefully, you already have a tax strategy in place. Many factors go into this strategy such as your gross income, number of deductions, when you’d like to retire, etc. If you suffer a job loss, death of a close relative, birth of a child or any other life altering event; you should consult with your tax planning attorney. Any one of these items could impact your overall tax strategy which may need to be adjusted. Your tax planning should be an ongoing conversation that has room to be maneuvered and changed if needed.
- You are starting a business. Congratulations! Starting a business is a huge step. Before you file any entity paperwork, consult a tax planning attorney. The specifics of your business setup can cost or save you a bundle in taxes. Your situation and financial projections will help determine if you need to set up an S-corp, C-corp, or LLC. The structure of your business and your long term plans need to be assessed to make sure your money is going back into your business and not to taxes.
- You currently own a business. If you already have an established business you may still benefit from meeting with a tax attorney. There are many strategies and deductions available and you should be taking advantage of as many as possible. Entrepreneur.com gives a small sampling of tax tips for businesses. They list items such as putting your children on the payroll, implementing a 401k and purchasing a vehicle and taking advantage of the depreciation deduction. Not every available deduction will fit your situation and this list given by Entreprenuer.com is far from comprehensive. Existing business owners also need to consider their exit strategy. What does your business succession plan look like? Are you planning on selling your business or passing it down to your children? These are all questions that have potentially expensive tax implications. Work with your tax planning attorney to see which tax saving solutions fit your business.
- You are considering paying medical or educational expenses for a loved one. If you would like to financially assist a loved one, work with a tax planning expert to see if paying for educational or medical expenses is the best financial route. While there is a gift exclusion of $14,000 for 2016, per the IRS, you may be able to give more money tax free by paying directly for medical or educational expenses. In each instance, the money has to go to the institution directly; but there is no dollar amount cap to how much you can pay for your loved ones medical care or education tax free. There are other limitations and caveats for each, so work with your tax attorney to make sure you are correctly using this strategy.
Your hard earned money is your own. Work with a tax planning attorney to keep it that way. If you find yourself in any of the scenarios above, it is particularly important to make the most of every tax advantage possible.