Estate administration in Michigan doesn’t have to result in what is sometimes called the “death tax.” In fact, when properly planned, your estate could pay little to no taxes. The key differences between paying and not paying taxes are in how you store your money. You have a right to use measures to legally reduce or eliminate tax without actually evading taxes.
Your will and testament
Your will gives a court directives regarding your wishes after you pass. Estate taxes could be avoided when you have a disbursement plan in your will. Assets being assigned to beneficiaries may be enough to deter debt and tax collectors that make claims against your estate. Moreover, a judge can motion for your assets to be allocated according to your wishes and not that of a tax agency.
Beneficiaries protect your property from estate tax because what they’re to receive is only withdrawable by them. In most cases, your assets aren’t accountable to a court until you die or transfer such assets. The longer you hold your wealth in legal accounts, the longer that wealth remains ineligible for taxing. Here are some examples of accounts that are tax deferred:
- Life insurance: Insurance policies are activated only when certain conditions are met. Unless annuities get paid, the money paid into an insurance plan sits in a tax shelter.
- Retirement accounts: Retirement accounts are specifically deemed as being for retirement due to their deferred statuses. Such accounts are accessed in retirement and aren’t taxed beforehand.
Your estate tax in Michigan
You have legal ways of reducing your estate tax or avoiding it altogether. What you must keep in mind, however, are the legal conditions for each option you have. Tax avoidance is only possible through specific account types, so it’s important to understand the various accounts and their conditions.