How to Plan for, or Avoid, Transfer Taxes

As a recent article suggests, estate planning encompasses a lot more than most people would think. Not only does estate planning allow you to structure the final distribution of your assets upon your death, but it also allows you to provide for the management of your assets during life, plan for the care of your children, and make important decisions about what kind of medical care you would like to receive at the end of your life. Although estate planning encompasses all of these things, most people come to the table with an overwhelming goal of avoiding transfer taxes, namely Estate Taxes, Inheritance Taxes and Gift Taxes.

There are plenty of ways that estate planning can be used to minimize the tax liability an estate will face after the owner’s death. In many situations, it is possible to plan for zero estate taxes. Some strategies involve giving up control of certain assets. For example, a person could zero out their tax liability by setting up a charitable trust. Others, such as Family LLCs (FLLCs) and Family Limited Partnerships (FLPs) allow owners to maintain more control..

For the ultra-wealthy, there are many sophisticated asset transfer mechanisms that can be used to avoid transfer taxes. These mechanisms include foreign grantor trusts, dynasty trusts and private placement trusts. Again, these mechanisms often mean that a person has limited or no access to the assets within the trusts.