Avoiding The Death TaxCarson E. Koziol
March 9, 2009 — 1,476 views
We all have heard that there are two things certain in life: death and taxes. In fact, even death is taxed so the government has a built in redundancy. I am about to suggest a way to help you avoid the associated probate and income tax at the time of your death.
This method does not apply to everyone so please consult with your tax advisor/attorney/CPA BEFORE you jump into this IRS approved method. I say it doesn't apply to everyone because the very rich and the very poor will probably use a tax structured device for their personal estate. Middle class America should seriously consider this device.
My not so secret tax avoiding method is a Funeral Trust. Properly structured it protects your money from probate, lawsuits, creditors, income taxes and even serves as a protection from Medicaid spend down requirements. The inside secret to this process is a purchased life insurance policy that is then assigned to an irrevocable funeral trust. The resulting document is a solid, safe and secure plan to cover your final expenses.
This little jewel has maximum limits with which it can be funded and, as you might guess, they vary by state. Again, consult with a tax professional or attorney on the limits.
Most people have set aside money for their vacation, college tuition, weddings, brithdays and assorted other life events but very few have prepared themselves for the ultimate event. In fact, AARP stated a funeral can cost upwards to $10,000, yet very few people have taken any steps to ameleorate this final expense.
The beauty of this Trust is it can not only perform the above referenced protections but it can be as simple as a one page document. If you own an annuity, CD, savings account, money market account, mutual fund, stocks, bonds or other such investments, not one of them can provide these same safeguards.
This trust not only guarantees to pay for the funeral but it can pass along any remaining proceeds to the beneficiary(ies). This means money to cover any remaining bills or expenses left behind to be paid by the family. Obviously, if there aren't any bills or expenses, the money isn't obligated and can be spent any way you wish.
Given the benefits of this device, it pays to look into it especially if you want to provide your survivor(s) with a tax friendly means of receiving money.
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