We have all heard the classic “KISS” design principle, which can be politely interpreted as “keep it short and simple.” The fact is that some estate plans demand a bit of complexity due to the size and scope of the estate and the wishes of the individual involved, but even in those cases it is best to keep it as simple as possible.

The point is that estate planning solutions don’t have to be overly complicated to be useful and effective, and we would like to underscore that fact here by pointing out the value of these three simple inheritance planning tools.

Life Insurance

Life insurance is as rudimentary as it gets but we couldn’t get by without it. If you are single and have no one depending on you, it is a good idea to carry enough insurance to cover your final expenses. But if you have a spouse and children that rely on your income, it is important to do the math and make sure that sufficient coverage is in place.

Gift Giving

You are entitled to a $1 million lifetime gift tax exemption, so you can use this to give tax-free gifts to your heirs while you are living and reduce your estate tax liability. In addition, each taxpayer can give gifts of up to $13,000 every year to an unlimited number of people. If you use these exemptions wisely and with good timing they can provide you with a great deal of tax efficiency.

Pay On Death Accounts

POD and TOD (transfer on death) accounts are an ideal vehicle for those who are seeking simple and direct transference of assets to their heirs. All you do is fund the accounts at a bank or brokerage and name your beneficiaries. When you pass on they assume ownership of the assets directly and the transaction avoids the process of probate.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

Will your estate owe federal estate taxes after you pass away? These are federal taxes assessed to estates larger than the federal exemption level. Eligible estates will owe a hefty tax rate for items above the exemption amount.

Currently, there is no exemption level due to the fact that Congress did not renew the 2009 tax law. In 2011, estates worth more than one million dollars are expected to owe a tax rate of 55% for assets above the limit. If you are among those affected, you can reduce or eliminate your estate tax load.

There are several ways to reduce your estate taxes with the help of your attorney. The primary focus is on removing items from your taxable estate and placing them into an AB Trust for spouse or Irrevocable trusts for your children. You can also place funds into a Charitable Remainder Trust, which will provide you income during your life while removing those funds from your estate.

If you have sizable life insurance policy, you can place it into an Irrevocable Life Insurance Trust. This will safeguard those funds for your family, provide estate tax relief and allow you to create a slow disbursement schedule for your loved ones.

Another option is a Family Limited Liability Company which allows you to retain control of your property for income purposes. All of these options not only provide estate tax reduction, they also provide asset protection for you and your family.

Why

Reducing your estate taxes can help to protect the inheritance of your loved ones. If your estate is hit with the expected 55% tax rate, your family’s financial future may be affected.

With estate tax reduction, you can provide your family with income for longer. This can give you peace of mind if you have underage children who will someday need funds for college or if you have a special needs family member who will need lifetime financial support.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

Choosing life insurance policy is a great way to get your family on the road to financial stability. If you pass away, a life insurance policy can provide your family with funds for your final expenses, for income in the years ahead, and for your children’s education.

Research Your Options

There are two basic types of insurance: term and permanent. Review each to determine what fits best for you. The basic difference between term and permanent life insurance is the amount of time the policy is intended for. Term life insurance, which is often cheap when you are young, is only intended for short periods of time. Renewal may bring higher premiums, especially as you age. Permanent insurance allows you to plan for the long term. You can lock into a rate, which may be higher than a term policy, but it will last for your lifetime.

Get Quotes

Once you determine which type of insurance is best for your purpose, you may want to speak with agents from different companies to get quotes. You can also use a broker to help you compare prices. Avoid pushy salespeople who try to get you into a policy before they understand what works for you.

You can buy life insurance directly from the company, from an agent, or with the help of your insurance broker. If you choose to buy directly from the company, you will have to be your own advocate, and you may get someone different on the phone every time you call. If you use an agent from that company you may be able to establish a rapport, which could make the process easier.

Find Ways to Reduce Your Rate

While you are considering life insurance policies, you may also want to do some work on your own to lower your rates. Did you know that quitting smoking, losing weight or cutting back on alcohol can help you to get a policy with a lower rate? This could save money and help you live longer too.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.