Many individuals overlook the possible consequences that can come along with an estate or inheritance tax because they too often assume such a tax will not apply in their circumstances. However, with real estate prices becoming higher there is always the possibility that such a tax and subsequent tax penalties could be assessed. It must be kept in mind that the inheritance tax threshold has not necessarily risen at the same rate as have real estate prices.
It's always a good idea to take advantage of professional advice when it comes to one's entire situation. However, care must be taken to look at all of the property that one is leaving behind including investments, real estate and other assets. As we will wish to leave as much money as possible to our heirs, we will also wish to take advantage of every legal means that can reduce the tax liability that will be owed by them when they inherit from our estate.
There are a number of ways to mitigate the tax consequences when it comes to passing such property on. This can include trusts, setting up of joint ownerships in a company, partnerships, etc.
However, it's important to make certain that such documents are set up correctly and are not negated due to a legal technicality. Otherwise the entire purpose of long-term financial planning can be defeated. That's why it's important to speak to attorneys who are familiar with the estate planning. Tax planning when it comes to wealth transfers is never simple under any circumstances.
Source: Property Forum, "Real estate and inheritance tax," Mark Benson, May 13, 2014