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Estate Planning Tips Every Baby Boomer Needs to Know

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Baby boomers have accumulated more wealth than any previous generation, according to The Wall Street Journal. Specifically, Americans over 70 years old have accumulated more than $35 trillion in assets, according to Federal Reserve data. That figure accounts for 27% of all wealth in the United States, an increase of 20% compared to 30 years ago.

And according to investment consulting firms interviewed by The Wall Street Journal, baby boomers will give away an estimated $70 trillion between 2018 and 2042. Approximately $61 trillion will go to their children and other family members. The remaining $9 trillion will likely be given to philanthropic organizations.

So, what’s the best way for baby boomers to pass along their hard-earned savings? What options are available? And what are the tax implications for different approaches?

What estate planning options are available to baby boomers?

People might only think of estate planning as creating a last will and testament simply to decide what to do with their assets after their death. But as The Wall Street Journal article illustrates, baby boomers are taking a different approach to what they’re doing with the money they have saved and invested throughout their lifetime. Some are choosing to give annual gifts to family members and charitable organizations. Others are creating their own philanthropic organizations and charitable foundations to distribute their assets.

There are many estate planning options available. Some of the most common options people chose include establishing a trust during their lifetime to distribute their assets. There are many different types of trusts, including revocable trusts, irrevocable trusts, irrevocable grantor trusts (IGT), and generation-skipping trusts. Each one has its own advantages depending on each family’s financial situation.

What are the tax implications?

The tax implications for different estate planning tools can vary widely. But in many cases, the goal remains the same – to minimize how much someone pays in state or federal taxes when transferring wealth to family members or charitable organizations.

Many charitable organizations fall under the category 501(c)(3), meaning they are exempt from federal income tax under section 501(c)(3) of Title 26 of the United States Tax Code. This is why many people choose to donate money directly to non-profit organizations.

Setting up a trust, charitable foundation, or another type of philanthropic organization is another way of passing along someone’s assets and avoiding inheritance taxes. In addition, family members are allowed to give up to $15,000 to each family member tax-free every year under the IRS’ annual gift tax exclusion.

Other times, family members make direct payments for medical care or educational expenses (including college tuition) directly to the institution on a family member’s behalf. When family members do so, such payments are not subject to any gift tax consequences.

How an estate planning lawyer can guide you

Estate planning can be a complicated legal process. The stakes can be very high as well. If not done properly, you or your heirs could be subject to substantial federal taxes, inheritance taxes, or penalties for violating state or federal tax laws.

The experienced estate planning attorneys at The Law Firm of Brown & Jensen in Arizona can provide the assistance and guidance you need to make informed decisions about your wealth. We thoroughly understand the constantly changing state and federal estate planning laws in Arizona. We know which approaches can be the most effective. That’s why we want to work with you to decide which strategy makes the most sense for your specific needs and goals.

Learn more about how we can help you with your estate planning decisions. Contact our law firm and schedule an appointment today. We have eight offices conveniently located throughout Arizona, including offices in Mesa, Tucson, and Scottsdale.

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