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Sacramento Estate Planning Attorney

Taxes on beneficiaries could be very costly


Residents in California who are planning for the well-being of their future generations and heirs probably have a lot of common goals. For one, they want their heirs to be able to enjoy their inherited assets, whether it be a taste of the good life or a little extra something to help them make their ends meet or send their kids to college. Moreover, they probably want to avoid punitive taxes on the assets and property they plan to leave for their heirs and beneficiaries.

These two intertwining goals can often be achieved with the help and advice of an experienced California estate planning attorney, who can work with clients to maximize the value and enjoyment of the property their heirs will one day inherit.

One way to accomplish this is through the purchase of a life insurance policy, which is a common tool in most estate plans. The beneficiary of the insurance policy will often be able to enjoy the proceeds without having to pay estate or other taxes, especially if the policy is held by a trust.

But even if estate taxes are unavoidable because of the size of the estate, having a life insurance policy in place can make it easy for beneficiaries to come up with the cash necessary to pay this tax without having to liquidate other assets. For example, an heir who receives a $7 million piece of real estate and a $250,000 life insurance policy could use the life insurance proceeds towards the tax, leaving the real estate intact.

There are also ways that benefactors can reduce the potential tax hit to their heirs on other property transfers through the use of trusts and other entities. For more information and ideas, people with substantial estates could seek legal advice regarding their estates and trusts needs.

Source: Main St. "How to Keep Your Estate Planning a Tax-Free Proposition," Jason Notte, Feb. 26, 2015

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My Sacramento law practice, Michael A. Sawamura, Attorney at Law, focuses on wills, trusts and estate planning law in addition to business law and corporate defense services. My clients include professionals, government employees, small businesses, blue-collar workers and national corporations.

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