It's Never Too Early - or Too Late - to Avoid End-of-Life Taxes

 Posted on September 24, 2012 in Estate Planning

No matter what stage you are at in life, avoiding end-of-life taxes is a smart move. By taking certain steps, you can reduce your income taxes, federal estate taxes, and state estate and inheritance taxes. Although a recent Chicago Tribune article states that these techniques work best for a U.S. citizen who is married to his or her U.S. citizen spouse, with living descendants, they can also work as a starting point for people in other, more complex, situations, as well.

First, granting a power of attorney for your spouse will allow him or her to make financial, tax-saving decisions in the event that you become incapacitated. This saves your spouse from having to pursue lengthy guardianship proceedings in court and potentially miss important tax deadlines at the end of the year.

Next, ensure that you and your spouse have separate investment accounts. This move allows you to freely transfer assets back and forth between spouses so as to minimize taxes in various situations.

Another option to consider is leaving IRAs not to your spouse, but to your grandchild. This step may allow you to leave a certain sum of money to your grandchild that is not subject to estate taxes, and that your grandchild can leave in place for a number of years.

Finally, making gifts to your children or grandchildren during your lifetime tends to make a great deal of sense. These gifts can save state taxes, as well as federal taxes if you make the gifts earlier than 36 months prior to your death.

In order to determine whether taking any or all of these steps would be beneficial to you and your family, you should consult an experienced DuPage County estate planning attorney for assistance. Contact our DuPage County office today for a thorough evaluation of your situation, and see whether these steps are right for you.