How An Estate Lawyer Will Help You With Tax Avoidance
There is a big difference when it comes to taxes between tax avoidance and tax evasion. Tax evasion is simply not paying the taxes that you owe, which is illegal, and tax avoidance is finding the legal loopholes that will help you pay as little tax as possible. Here are a few ways that an estate lawyer will help you with tax avoidance for your estate.
Advise To Avoid Selling Appreciated Assets
As someone gets older in age, you'll likely have a lot of assets that they have acquired that have significantly appreciated in value since they originally bought them. You will be advised to not sell assets as they get older in age because they are not going to be doing anybody any favors in terms of the taxes that they have to pay. There are actually some advantages from not selling assets but passing them along to others after you pass away.
For example, if you own a share of stock that was purchased for $40 a share and is now worth $100, selling that share of stock would result in $60 of increased value that would be subjected to capital gains taxes. If that stock was passed along through estate planning and not cashed out, then the full $100 value of the share would be retained. Your heirs could then let that investment continue to grow at the full amount and pay taxes on it at a later date when the share is worth even more money. The same logic applies to property that was purchased and has appreciated over the years.
Take More Than The Minimal IRA Distributions
A problem that can happen with an IRA is that you end up only taking out the minimal amount required as a distribution each year. The problem with this is that you end up leaving a lot of money in the IRA that is then taxed at a much higher rate when it is received by your heirs that are a beneficiary.
A recommended tax strategy is to actually take out more than the minimum distribution requirement, even if you are not using all of the money. You may pay a higher tax rate on that money at the time, but it is still going to be much less than the tax rate that your heirs would pay to receive it later on. It helps lower the overall tax burden that needs to be paid on that tax-deferred money. Of course, this doesn't apply to those that have a Roth IRA where the taxes have already been paid.
Reach out to an estate tax preparation professional for more assistance.