Nov 11, 2019 02:44 PM EST By Staff Reporter, UniversityHerald Reporter

If you intend to pass any type of assets to heirs, be sure to know about the most common, and safest, ways of doing so. Simply using your will to leave everything to family and friends is usually not the low-tax solution. For one thing, wills must go through a probate process in the state where you reside. That can take time and eat up a chunk of the assets in court and attorney fees.

Here are four ways to bequeath your accumulated assets to loved ones, friends, charitable foundations, political parties and, if you wish, pets. In fact, you can use any of the methods below to pass on wealth to anyone you want to give it to:

Financial Gifts

There are zero tax implications for both you and the recipient when you give a cash gift of up to $14,000 per year to anyone. If you're married, you and your spouse can double the amount of the gift, annually, to children, friends, business partners, or whomever you designate. Many elderly parents give annual cash gifts to children and grand-children every year. The practice is a smart way to convey a portion of your wealth quickly and efficiently, and at your sole discretion, without worrying about probate or tax implications.

Modified Endowment Contracts

A modified endowment contract, commonly called a MEC, is a special kind of life insurance policy in which you purchase the entire contract with one, of just a few, premium payments. It's a fast way of immediately creating a large death benefit, typically a 5-to-1 exchange, for your designated heirs. The benefit is tax-free to the recipient and does not go through probate. Additionally, the beneficiary gets the money quickly and it can't be legally contested by anyone. MECs aren't legally defined as life insurance policies by the IRS. Instead, they're treated more like IRAs or 401Ks. In any case, they can be the perfect way to transfer a large amount of money to a beneficiary after your death.

Trusts

Trusts are contracts that create a special kind of fund. The fund is managed by a person or institution called the trustee. That person's job is to carefully manage the account and dole out your assets in a specified way to beneficiaries. Trusts are the preferred way for people with large estates to minimize taxes and avoid the probate process. Trusts are usually the centerpieces of estate plans for wealthy, and sometimes not so wealthy, individuals. Their ability to keep the tax bite to a bare minimum is their biggest selling point. Most banks have trust departments that do nothing but administer trust accounts for their clients.

Special Needs Trusts

For parents who have special-needs children, this kind of trust is an ideal way to make sure the beneficiary is not put at risk of losing Social Security, Medicare or other kinds of benefits. The key mechanism of a special needs trust is the timing of distributions. That way, the beneficiary is able to keep current benefits, like Social Security Disability Income, and face minimal tax impact on the trust's distributions.

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