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Visalia, CA Estate Planning Blog

Tuesday, April 1, 2014

How Will the Taxman View Your Estate Plan?

 

Can I Get In Trouble With the IRS for Trying to Reduce the Amount of Estate Tax That I Owe?

You’ve likely heard that one of the many benefits of estate planning is reducing the amount of federal, and state, taxes owed upon your passing. While it may seem like estate tax planning must run afoul of IRS rules, with the proper strategies, this is far from the case.

It is very common for an individual to take steps to try to reduce the amount of federal estate taxes that his or her "estate" will be responsible for after the person's death. As you may know, you may pass an unlimited amount of assets to your spouse without incurring any federal estate taxes. You may pass $5.25 million to non-spouse beneficiaries without incurring federal estate tax and if your spouse died before you, and if you have taken certain steps to add your spouse's $5.25 million exemption to your own, you may have $10.5 million that you can pass tax free to non-spouse beneficiaries.

It’s always best to seek out the advice of an estate planning attorney when making decisions like these, just to make sure you’ve dotted all the i’s and crossed all the t’s. But it’s particularly important to secure the assistance of someone like me if your estate is still larger than these exemption amounts. For such estates, there are planning techniques that we can implement to help reduce the taxable value of your estate in order to pass more assets to your loved ones upon your death, and lessen the impact of the estate taxes. 

After your death, the duty normally falls on your executor (or perhaps a successor trustee) to file the appropriate tax returns and pay the necessary taxes. Failure to properly plan for potential estate taxes will significantly limit what your executor/trustee will be able to accomplish after your passing. Let me help you make sure that this doesn’t happen to you.

If you have taken steps to try to reduce the taxes owed, it is possible that the IRS may challenge the reported value or try to throw out the method you used. This does not mean that the executor/trustee will be in trouble; it just means that they will need to be prepared to support their position with the IRS and take it through an audit or even a tax court (or other appropriate court system). In the event of a challenge, it is critical to have a good attorney to help you ensure that all of the necessary steps are taken; and it’s my job to do just that.


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Located in Visalia CA, Joan A. Watters, Esq. Attorney at Law assists clients throughout the Central Valley of California with various estate planning and elder law. Areas include but are not limited to Visalia, Exeter, Tulare, Hanford, Bakersfield, Lemoore, Three Rivers; and the surrounding counties of Tulare, Kings, and Kern.



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220 South Mooney Blvd., B, Visalia, CA 93291
| Phone: 559-635-1775 | 800-403-5029

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