As we head into the holidays, you may notice more end-of-year nonprofit fundraising letters in your mailbox. That's because many people make charitable donations at the end of the tax year, knowing that they can deduct charitable donations from their income tax for a year in which they made a contribution. Besides year-to-year income tax reductions, however, you can use charitable donations as a way to reduce your estate tax. A person who donates to an approved charity at the time of death can have the amount of the donation subtracted from his or her estate, thus lowering his or her estate tax.
After a lifetime of hard work to save up to take care of your family, all you will want is to be able to pass your estate on to your family and loved ones. However, what seems like a simple action can actually be a complicated process that may go awry if not handled properly. Legal fees, taxes and other unnecessary expenses may set you back unless you take these steps.