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Asset protection important amid shifting estate tax exemptions

Wealth preservation for families in Georgia often revolves around the problem of limiting estate taxes. When an estate's assets exceed the exemption level, then as much as 40% of the estate's value might be owed to the government in taxes. Historically, the exemption level has fluctuated quite a bit. Years ago, an estate's value beyond $600,000 was exposed to taxation. The exemption has risen dramatically in recent years with tax law now granting individuals an exemption up to $11 million as of 2020. In 2026, however, tax law will drop the exemption to $5 million.

In such an environment, estate planners sometimes choose to employ asset protection trusts. These legal entities serve as the official owners of assets in order to separate the estate from any particular individual whose death could trigger estate taxes. Trusts might add another level of protection through the use of trust protectors whose powers activate if the original trustee faces liabilities due to divorce or perhaps a lawsuit.

Trusts can come in many forms, but living trusts often provide the best vehicle for protecting assets. Living trusts differ from testamentary trusts that are only created after a person dies. Trusts known as dynasty trusts have the potential to preserve wealth across generations by continually shielding assets from estate taxes.

When developing a trust strategy, a person should understand how tax and estate laws influence individual financial goals. A consultation with an estate planning attorney might provide specific insights about how to set up trusts. An attorney may analyze a person's goals from multiple angles and suggest how to shield assets under many different circumstances that might arise. With legal advice, a person might fulfill purposes like supporting a surviving spouse or paying for the education of heirs.

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