New tax laws were created in 2012. As a result, the estate taxes present a lesser burden than the income taxes. Personal exemptions and itemized deductions were restored. In addition, due to Obamacare, the Medicare tax on investment income was enforced. Now more than ever, the possibility for fresh strategies and a new emphasis can be applied to estate planing. Proper estate planning reduces income taxes and coordinates the financial burden in the future.
Life insurance is one of the most valuable investment vehicles proven to reduce the income taxes. Permanent life policy builds cash value and can be withdrawn from when the earnings are compounded over several years. The loans do not have to be repaid and are tax free as long as the cash value is ample and will help to pay the regular premiums. This attractive method of investment has created a venue for people to own the policies directly and their heirs to receive the benefits free of fees and taxes. Employer retirement plans have also adopted the idea because of favorable benefit-premium ratio, where the benefits largely exceed the premiums paid.