For people with taxable estates, advanced estate planning above and beyond a basic foundational estate plan is one of the options for minimizing or even eliminating estate taxes after they die. Aside from this, advanced estate planning can be used to perpetuate family values and protect assets for the benefit of future generations. With these goals in mind, advanced estate planning is really done for three important reasons:
1. Estate Tax Planning - Advanced Estate Planning to Reduce Estate Taxes
Reducing estate taxes is generally done through gifting assets such as highly appreciated stock directly to loved ones or to a charity or into a trust for their benefit, or gifting away interests in closely held business entities such as corporations or limited liability companies. This works to reduce the value of the owner's estate because once the assets or business interests are gifted away from the owner directly to the beneficiaries or into a trust for the benefit of someone other than the owner, the gifted assets can no longer be included in the value of the owner's estate for estate tax purposes.
2. Legacy Planning - Advanced Estate Planning to Create a Legacy
There are different types of trusts that can be established not only to minimize or eliminate estate taxes, but also to create an ongoing legacy for future generations. Many states allow trusts to continue for hundreds of years or even in perpetuity, thereby allowing their residents to establish dynasty trusts for their current and future family members. Others choose to create a legacy in their community by setting up charitable trusts or private foundations that will provide a self-perpetuating endowment for years to come.
3. Asset Protection Planning - Advanced Estate Planning to Keep Assets Safe
For those who have accumulated even minimal wealth, the fear of losing it all in a lawsuit can become a great concern. Many advanced trusts, such as Spousal Lifetime Access Trusts, or SLATs for short, can not only help to minimize or eliminate estate taxes, but also offer the added bonus of protecting the assets owned by the trust against lawsuits and divorce decrees. In fact, domestic asset protection trusts and certain offshore trusts are specifically designed to keep assets held in these trusts away from creditors and divorcing spouses. Other advanced techniques, such as gifting through a family limited liability company, add an additional layer of asset protection for the property owned by the company.