The premise of this hub is to give light to one way of avoiding taxes legally. Estate planning is most certainly necessary in such a hostile and volatile state of the economy. Tax planning really used to be no big deal, and estate planning was only for the rich. That's not the case today. At one point in time, one could make a financial plan and be relatively sure that the tax laws were going to be stable enough to remain stable as he or she carried through those plans. In recent years, however, tax stability is hard to judge, and the effectiveness and efficiency of tax planning an Edsel! To be frank... ity's difficult, and the tax code is a joke! This is not to say that one should not do tax planning anymore, rather that it must be a more comprehensive undertaking. Judge Learned Hand, someone I admire that was a famous federal court judge from New York once stated, "Anyone may so arrange his that his taxes shall be as low as possible. He is not bound to choose that pattern, which best pays to the Treasury. Everyone does it, rich and poor alike, and all do right; for nobody owes any public duty to pay more then a the law demands."
A person in the current tax climate must learn to shave off the burden of high taxation and in many cases even shun them. Estate planning is one way this can be done. In our own day, Jack Kemp said, "In America, we tax work, investment, employment, savings, and debt. It's time we start to reverse this trend." I believe that no truer words have ever been spoken. Let's be reasonable… In this one approach to the legal avoidance of taxes by way of estate planning, I will try not to be too cynical. However, I reflect on my understanding of the founders and colonists of this great nation. If the colonists were suppressed into the tax situation in which we find ourselves today, there would be hell to pay! There would probably be more than just tea in the bottom of Boston Harbor. They would have probably made several trips to Washington, and why this is not happening is beyond me. I have a strong feeling they would have received better representation than the taxpayers of our day. That said... back to estate planning to avoid taxes.
A simple last will and testament is not enough to write these days. It would be wise to seek out a paralegal (cheaper than an attorney) or a good attorney to help you set up a living trust. If you do not, your estate is going to end up in the courts as your heirs duke it out and/or challenge your will. A living trust avoids the court system entirely, except for anything you did not have signed over to your trust. If you plan well, everything will be in your living trus5t, governed by the administrator of trustee(s) you appointed.
You should have insurance policies to pay the estate taxes, because you may have some estate taxes, depending upon the size of your estate. It is much cheaper to plan ahead and take out insurance policies, which will more than cover any taxes due, than to hope that your heirs will have saved enough money to pay them. When should you do your estate planning? Do you know when you are going to die? If you do not know when you are going to die, and most of us do not know the answer to that question, then I would suggest doing your estate planning the sooner the better. For example, if you have children, you may want to have a pour-over will in setting up a living trust so that state does not put your children in foster homes in the event of the death of both you and your companion.
A word of advice from someone who experienced the painful decline of the economy resulting in huge real estate losses due to improper planning. If you own any assets such as a house, a business, etc., then you may want to set up a living trust. There are several considerations to be made, so you will certainly need legal advice. Most states require that you use a lawyer to execute a living trust anyway. If you need to be referred to a law firm for help with estate planning use you state bar association to identify and/or to request information on lawyers.PLease do yourself a favor and don't rely on the internet to find a legitmate lawyer. By researching law firms with your state bar association, you will most certainly find a reputable law firm.