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Methods for avoiding both taxes and probate

On Behalf of | Apr 24, 2014 | Trust Administration |

There is various tax saving strategies that can be put into that will prevent finances in an estate from being depleted. Unfortunately, many people do not understand just how much taxes can affect one’s finances in the long-term.

These strategies can be somewhat complex because every investment is taxed in a different manner. Money that’s put into a Roth IRA, a taxable brokerage account or a 401(k) will require different handling. Helping boost the after-tax investment returns, however, is still a matter that we can retain some control. This can be done by placing the right kind of investments into the correct type of accounts to reduce or eliminate tax consequences.

However, while thinking out such a strategy we still need to make certain that we are putting money away.  Tax efficiency is only one portion of long-term financial planning.  The money that we place into an IRA could grow substantially in any case.  We just wish to have the money in the IRA grow with the least number of tax consequences.

The goal in estate planning is to maximize the amount we can give away to our heirs without subjecting that inheritance to taxation or penalties.  Protecting that money can be difficult, however, and subject to a number of regulations.  

Trusts that are properly drafted can allow assets within to avoid probate.  California residents can also avoid a number of legal requirements by having these trusts set up. Still, there are legal requirements that come along with trust administration and it’s good to consult with an experienced estate planning attorney to make certain the trust is structured correctly.

Source: NASDAQ, “Boost Your After-Tax Investment Returns,” April 15, 2014