Tax season is upon us, and while most people are focused on filing their returns, it’s also the perfect time to review your estate plan. Why? Because taxes and estate planning go hand in hand, and smart planning now can save you and your loved ones time, money, and stress later.

How Taxes Affect Your Estate Plan

Estate planning isn’t just about passing on your assets—it’s about doing so in a way that minimizes tax burdens. Here’s how taxes can impact your estate plan:

• Estate Taxes: While the federal estate tax exemption is high, state laws may impose their own taxes. Be sure to check if your estate is at risk.
• Gift Taxes: Giving away assets during your lifetime? Make sure you’re within the IRS gift tax exclusion limits to avoid unnecessary taxes.
• Income Taxes on Inherited Assets: Certain assets, like retirement accounts, may be subject to income tax when inherited. Planning ahead can reduce this burden for your heirs.

Smart Moves to Reduce Taxes

The right estate planning strategies can help minimize taxes. Consider these options:

• Gifting Strategies: Take advantage of the annual gift tax exclusion to transfer wealth tax-free.
• Trusts: Certain types of trusts, like irrevocable trusts, can help protect assets and reduce tax liabilities.
• Charitable Giving: Donating to charities can provide tax deductions while fulfilling your philanthropic goals.
• Retirement Account Planning: Understanding how required minimum distributions (RMDs) and beneficiary designations work can help avoid unnecessary tax penalties.

Common Estate Planning Mistakes to Avoid

Tax laws change, and what worked in the past may no longer be effective. Avoid these common mistakes:

• Failing to update your estate plan after major life changes (marriage, divorce, new children, etc.).
• Not reviewing beneficiary designations on retirement accounts and insurance policies.
• Ignoring state tax laws, which may differ from federal rules.
• Not planning for incapacity, which can create tax and legal issues if you become unable to manage your finances.

The Best Time to Act Is Now

Estate planning and taxes go hand in hand, and small changes today can lead to significant savings in the future. As you prepare your taxes this season, take time to review your estate plan to ensure it aligns with your financial goals.

Need help navigating estate taxes or updating your estate plan? Contact us today to ensure your legacy is protected!