Inheriting with the Tax SuperSheet™
Think for a minute about why wills are written. They are put in place to ensure that loved ones are cared for even after a person passes on. A lot of thought is put into the preparation and writing of a will, but only from the side of the giver. What about the receiver?
At FFP, we consult with our clients to make sure that they inherit wisely. This is an important component of financial planning that is overlooked by the vast majority of advisors.
The Tax SuperSheet™ can help honor the intent of a will by making sure that the inheritor receives the maximum value of the gift. Often, establishing a trust can be very beneficial to heirs. By looking at trusts as well as different strategies, FFP can help you determine where to place your gift and minimize tax implications.
For example, say your heirs are middle-aged, at the peak of their careers, and thus are currently in a high income tax bracket. You have several pre-tax investment accounts and are considering options for distributing them after your inevitable passing. In this case, the Tax SuperSheet™ might reveal that these investments should be named to a trust rather than distributed directly to your heirs. Using trusts allows the distribution to your heirs to take place over several years (keeping them within the same tax bracket) rather than distributing it all at once and bumping them into the next highest tax bracket. The Tax SuperSheet™ allows us to precisely answer questions such as a) How much each year should your heirs distribute from a trust? b) What would be the tax liability for a one time distribution? Or c) How much will using a trust save in taxes over a X year period?