Posted in Tax & Estate Planning
Estate tax laws in the United States and its territories are constantly in
a state of flux, so it might seem difficult to create an estate plan that
avoids or minimizes the amount of taxes to which your estate will be subject.
However, keep in mind that the minimum estate value for paying estate taxes to
the U.S. government is very high as it is, as they only apply when the estate
is worth more than $5.45 million.
If you do have a large, valuable estate, here are some tips that can
help you to increase the amount of assets you can pass to your beneficiaries
without having to worry about costly estate taxes:
·
Leave all of your assets to your spouse: The exemption amount excludes
any assets you leave behind to your spouse. You are allowed to leave your
entire estate to your spouse under federal law without being subject to taxes.
However, once your spouse dies, the exemption amount still applies, so this
tactic is more used as a means to delay these estate taxes than to entirely
avoid or minimize them. Still, it can be a sensible “first line of defense”
against estate taxes.
·
Put assets into irrevocable trusts: Assets placed into
revocable trusts are still taxable if they exceed the exemption amount, as a
revocable trust is merely an extension of the grantor. Irrevocable trusts are
different because the grantor gives up control of the trust assets, as
ownership is technically passed to the trust. This means that any assets placed
in that trust go to beneficiaries without being subject to taxes.
·
Being smart with beneficiary choices: Estate taxes depend
entirely on your estate’s value. Retirement accounts and insurance policies
could impact your estate taxes, so you might consider designating beneficiaries
aside from your estate for these types of accounts.
·
Downsize: You may effectively decrease your estate’s value
to minimize estate taxes or get your estate below the exemption limit. Keep in
mind that the Internal Revenue Service has rules governing how much you can
give to beneficiaries within a given year, so you if you are not aware of these
rules, you could still be subject to gift taxes.
·
Look into other trusts: There are a number of other
types of trusts that can help you protect your assets and avoid estate taxes. A
knowledgeable attorney will provide you with more information on the options
available to you based on your personal circumstances and objectives.
Every individual’s estate is different, which means it’s best to seek the
assistance of an experienced estate planning
attorney to help you decide the best ways to minimize or avoid estate taxes
for you and your loved ones.
Steven K. Hardy is Chair of the BoltNagi Corporate, Tax and Estate Planning Practice Group.BoltNagi is a respected and well-established tax and estate planning law firm serving clients throughout the U.S. Virgin Islands.
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