What is Asset Location and How Does it Matter in Estate Planning?

It is crucial to have an up-to-date estate plan because too many people overlook the need for it. Some others, however, do the bare minimum. Sudden death or incapacity is an unfortunate but bitter reality. And that calls for an efficient and well-crafted estate plan. An experienced estate attorney can help you with all your concerns about an estate plan. And this is one of the reasons this site is built for.

There are ways you can make the most of your estate plan. One of them is making the use of asset location strategies.

“Smart” is Subjective

What sounds smart to you may seem otherwise to others. Smart for you can be passing on your assets to charity. Someone else would decide to pass on their assets to their children and call that a smart move. What is important here is: what is left and who will receive it.

Asset Locations

You must not mix asset location with asset allocation, which is a different concept.

Asset location simply refers to where a person strategically keeps the money he is investing –between tax-free, taxable, and tax-advantaged accounts – to maximize after tax returns.

Contribution to Charity

It would help if you determined, in your estate plan, what assets and how much to donate to charity. Then, these assets, if passed to an estate, would meet the internal revenue Service’s exemption requirements. And you would be free to pay any taxes on those assets.

One good strategy can be to make an annual contribution to a charity. This way, you would make the most of tax efficiencies while supporting worthwhile causes.

Inheritance and High-Earning Heirs

You may deem the equal distribution of assets the ‘smart’ and fair move. However, you should also be considerate of the tax implications of your transfers.

In the matter of high-earning beneficiaries, you can adopt a strategy to minimize taxes. For example, you can opt to surpass your required monthly distributions and use the money to buy life insurance.

To understand how it works and get the related information, you can contact us. Our experienced estate plan attorney would be pleased to assist.