Parents want the best for their children, and when they become grandparents
the same applies to the grandkids. Thoughtful
estate planning is one of the best ways to help and protect loved ones into the future.
Although New York does not have an inheritance tax, donors can make important
decisions to preserve their assets from federal taxes.
Protecting a child or grandchild's inheritance may not be an articulate
expression of love and affection, but it is an extremely practical and
logical way to help kids and grandkids succeed. People can avoid significant
tax obligations by thinking of their beneficiaries while making financial
decisions about estate administration. An inheritance that is subject
to burdensome taxes can be undesirable, particularly if there are ways
to avoid the taxes.
One way to shield beneficiaries from taxes is to carefully consider whether
it is a gift or an inheritance. Property that has appreciated in value
will be taxed at a much higher rate if donors give it as a gift instead
of leaving it as an inheritance. This is because the capital gains tax
will be applied to the real estate's increase in value if it is given
as a gift. There are many other ways to ensure beneficiaries will pay
only minimal federal taxes on their inheritance.
Pablo Picasso provides a lesson on what not to do for heirs: nothing. The
artist died intestate, meaning he did not have a valid will. When his
heirs gave his artwork to the French government they paid high estate
taxes, even though they could have profited from selling the works privately.
An estate plan maybe could have helped the heirs avoid such a loss. Picasso
was an artistic master, but his poor estate planning should not be emulated.
Source: CNBC, " Spreading Around Your Retirement Wealth Tax Free," Michelle
Lodge, May 29, 2012