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Navigating changed tax environment a goal of estate planners

In the world of estate planning, the strategies and techniques advisors recommend and use with their clients are always changing depending on various factors. One important factor, of course, is tax law. Nowadays, with increased income tax rates and higher taxes on investment income funding the Affordable Care Act, estate planning advisors are busy trying to help their clients reduce their tax liabilities.

Among the means estate planners are using to help their clients avoid taxes is to put more assets placed in trust into securities that are tax-exempt. An example would be municipal bonds. Another possibility, at least for some types of trusts, would be to make bigger distributions to beneficiaries with lower income tax liabilities. These are just a couple possibilities. 

Estate planning, of course, has to do with more than simply managing tax liabilities. While the specific goals of estate planning will vary between individuals, it is safe to say that financial security, ensuring management of the estate, and protecting the estate from creditors are other goals folks need to think about in the process.

That being said, planning around taxes is a significant concern for estate planning experts, particularly when the estate in question is large and has a lot of potential exposure. Even when there is no federal estate tax liability, there may be state tax liability to deal with.

Whenever working on an estate plan, it is important to ensure that the plan serves your specific needs. Just because something is good on paper doesn’t mean it will actually be good for you and your family, so take the time to come up with a plan that is right for you. 

Source: CNBC, “Estate planners shift gears in new tax environment,” Andrew Osterland, March 21, 2014. 

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