"The rich have made an art of avoiding taxes and making sure their wealth passes down effortlessly to the next generation. But the tricks they use - to expedite payouts to heirs and avoid handing money to the government - can also work for people with far more modest estates. "It's a strategic game of chess played over decades," says Mark Bosler, an estate planning attorney in Troy, Michigan, and legal adviser to Real Estate Bees."
"Though trusts conjure images of complex arrangements utilized by the uber-rich, they are relatively simple tools that can make sense for many people. They come with expense, often costing thousands of dollars in lawyer fees to set them up. But for a retired couple with a paid-off house, 401(k)s and a portfolio of investments, they can ease the passing of assets to heirs."
Death and taxes may be inevitable, but a large inheritance tax bill can be avoided through deliberate estate planning. Wealthy households use strategies to expedite payouts and limit tax exposure, and many of those techniques apply to more modest estates. Federal estate-tax exemptions generally affect only estates above about $15 million, while 16 states and the District of Columbia levy estate or inheritance taxes at lower thresholds. Probate can tie up estates for years and incur court and lawyer fees. Trusts serve as primary tools to bypass probate, simplify transfers, and can be cost-effective for retirees with paid-off homes, retirement accounts, and investments.
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