Should you work with a CPA long before your estate needs to be distributed or finalized? The answer is generally yes. And here are a few of the most important reasons why.

1. They Will Help Reduce Taxes

Your estate may or may not be subject to taxes upon your passing. While the threshold for owing federal income taxes is high — at least until 2025 — an estate with such features as a business, significant real estate, or other expected inheritances can surpass the taxable minimum. Your CPA can advise how to reduce the chances of owing estate taxes as well as what the tax impact of various choices might be to your heirs. 

Each ledger holds a record of certain types of transactions and is useful on its own. Sub-ledgers are the most detailed and record just one part of the business process (like the purchase of goods or the amount of taxes you must remit). These sub-ledgers are then used to create a less specific, but more complete, general ledger that oversees the entire operation.

An accountant is also up-to-date on tax law changes that could affect your estate. With recent tax reform through the TCJA (Tax Cuts and Jobs Act), even existing estate plans — especially those involving spouses — may need to be updated to avoid potential problems later on. 

2. They Can Aid in Trust Planning

Do you know how to deploy trusts within your estate plan? Trusts are legal tools you can use for a variety of purposes, including preparing arrangements in case you are incapacitated and cannot make your own financial decisions. Trusts are also used to care for the ongoing care of someone with special needs, minor children, or even adult children who need more structure in their financial assets.

An attorney can help set up trusts, but a CPA will aid you in ensuring you follow the tax rules, understand and file proper tax forms, and use the right type of trust. For instance, the income earned by a grantor trust is often taxable to the grantor (you) if not sufficiently decoupled from your control. These distinctions are important if you want to protect your financial interests. 

3. They May Advise Early Actions

Not all estate planning activities happen within your will or trust. Many people also find that making some smart moves now will help everyone down the line.

For instance, if your estate may exceed the tax exemption ($11,580,000 in 2020), the CPA may suggest using the gift tax exclusion to give money annually to heirs in advance. If the fair market value of your business could be the problem, you may diversify ownership or alter the business entity (such as forming a C or S corporation) now in order to reduce the value of your stake in it. 

4. They Can Help Your Executor

The intended executor of your estate will have a big job ahead of them. How prepared are they for their responsibilities? Most executors are unfamiliar with what they need to do and will have a lot of responsibilities during a difficult time. If you're proactive about working with them, you increase the likelihood that your wishes will be carried out and that everyone will have a smooth transition. 

The CPA will develop a relationship with the executor so that the executor has someone to turn to with questions. And the CPA can provide practical help filing a final tax return, estate Forms 1041, or Schedules K-1. 

Clearly, a CPA can be much help during the planning stages for your estate. Want to learn more about what they can do to help in your particular circumstances? Start by making an appointment with the accounting team at Bliss & Skeen Certified Public Accountants today. Our estate planning pros will answer your questions and get started providing a more stable financial future for you and your heirs.