Estate planning is for everyone and it is important to have an efficient distribution of your assets. Probably the biggest financial gift for your kids is to prevent them from being your financial caretakers after you are stop working or retired. Certain assets can be jointly owned with other persons, they could include investment accounts, bank accounts, real estate, and so forth. When an owner dies, the remaining owners will take over the asset and probate can be avoided. Some people may think that jointly owning an asset with their kids will also prevent inheritance taxes. Not so, even when probate is avoided through joint ownership, the assets are generally included when calculating inheritance tax.

It’s a good idea to apply for an ILIT (Irrevocable Life Insurance Trust). Ideally, life insurance proceeds should be included on the estate. Depending on the estate size, the federal estate taxes could be due upon death. When the ILIT is used correctly however, any the insurance proceed from the policy will not be included in your estate.

Obviously, an ILIT is irrevocable and can’t be amended after created. The ILIT requires a trustee, which could be anyone except the one who creates the trust (Grantor). The ILIT also needs designated beneficiaries, which are often the Grantor children. A properly structured ILIT can provide liquidity, for an estate burdened with illiquid assets, having an ILIT can be indispensable in order to pay large sum of estate tax bill without selling any assets. The grantor can’t withdraw contributions from the ILIT. When using an irrevocable trust, people can give away their money or assets even before death, which isn’t possible when using a revocable trust. Thus, an irrevocable trust become permanent after being established, no one can make changes or revoke it once formed. These arrangements should be set up according to the grantor’s wishes. When establishing the arrangement in estate planning, the goal of irrevocable trust should be to lower federal estate tax. When transferring the ownership of real estate or other properties, the grantor gives away the property to a beneficiary for good. It would mean that a grantor is no longer held responsible the property and so it doesn’t qualify as a part of the estate, as the result no federal estate tax payments are required. If the grantor secures a life insurance to pay a federal estate tax, it could be the only asset in the trust and it is possible for this policy to be separated from the grantor’s entire estate and isn’t subject to taxation.