Maximizing Estate Tax Exemptions

Q: Are there benefits to designating a charity as my IRA beneficiary?

Everyone wants to save money but most people don’t realize that hiring a skilled San Mateo estate planning attorney who understands how to minimize or eliminate estate taxes can save their estates – and consequently their beneficiaries – big time depending on their particular circumstances.

And you don’t necessarily need to be a high-net-worth individual to take advantage of these estate tax planning benefits.

One common scenario where a mistake can be made involves spouses who each want to leave their estate to the other. The marital deduction allows for unlimited transfers and gifts between spouses so there will be no estate taxes due when the first spouse dies. But depending on the couple’s net worth, it may be beneficial for the surviving spouse to take advantage of estate tax portability and utilize the unused portion, if any, of the first-to-die spouse’s individual exemption. Alternatively, a credit shelter trust is another option to maximize estate tax exemptions, depending on the couple’s situation.

Another common mistake involves the surviving spouse leaving their estate to the children and some portion to charity. Often, the surviving spouse’s estate may consist of the home, bank account, and an individual retirement account or IRA. Often, parents designate their spouse and then their children as the IRA beneficiary.

With most IRAs, the pay-out to the children is income-taxable but if paid to a charity instead, the proceeds would be income tax-free due to the charity’s exemption from income tax. Structuring the estate plan so that the charity’s bequest comes from the IRA funds instead of from the estate’s probate assets can result in more money in the pockets of the children who saved the income taxes on IRA proceeds by taking from the probate assets instead.

Skilled estate planning and estate administration attorneys with tax backgrounds and experience know these special details and can help ensure your loved ones receive as much wealth and security as you can provide for them.

Biddle Law Helps the Residents of San Mateo

If you are in need of an initial estate plan, or would like to modify an existing one, Biddle Law can help you. Contact us today to schedule a consultation.

From our offices in Belmont and San Mateo, we represent clients throughout California in all aspects of estate planning and estate administration.