When creating an estate plan, Florida residents should think about how much an asset is worth after accounting for taxes. Doing so may result in the government getting less and loved ones getting more of an estate's money. It can also help determine how assets are allocated or how they are distributed after a person passes. Let's say that a parent wanted to leave money for charity.
It may be possible to make a donation to the charity and leave another asset such as a retirement account to an adult child. However, it may be better to make the charitable donation from the 401k or IRA funds themselves. For instance, it could be a better decision to make a $100,000 donation from a $1 million IRA as opposed to making a donation and leaving the entire balance to a beneficiary.
This is because the after-tax value of the asset is higher at $900,000 than it would be at $1 million. It is important to remember that a beneficiary will pay taxes on an IRA or similar account whether they take distributions right away or over a period of time. To change how retirement assets are allocated, be sure to make the charity a beneficiary of the IRA. The will or trust directing the distribution should be created or changed with an attorney's supervision.
When done properly, estate planning may help to reduce the taxes that an estate or beneficiaries pay. It may also help to protect the privacy of the deceased person's family or those who receive an asset. While an individual can create an estate plan on his or her own, it may be best to have them reviewed by an attorney. This may help prevent errors that could lead to future legal challenges.