As the old adage goes, there are only two constants in life -- death and taxes. Luckily, folks who understand this fact can look to the future and plan for both. Recent changes to the tax exempt income threshold have already helped many in California with reducing estate taxes. Strategic choices about gifting and distributing assets can help others to pay less tax.
In 2013, the income limits for estate tax exemption were raised to $5 million. The estate of any person who has passed away with an estate less than the $5 million limit is not responsible to pay estate taxes to the IRS. Those high-asset individuals are eligible for taxation at a rate of up to 40 percent, but only if their estate is more than $5.49 million. Married couples can count two shares, making the exemption $10.98 million.
Fortunately, there are options. Gifting some of the estate, gradually, over time, before one's death is one such strategy. One can gift up to $14,000 per person per year, which can limit the amount of reportable assets. Another tool is the charitable trust. A revocable or irrevocable charitable trust can be utilized to contribute funds to charity and reduce taxable amounts of assets.
Many individuals who have worked hard their whole lives are interested in reducing estate taxes. After all, why not choose exactly how one's wealth should be distributed instead of having the government getting a sizable share? Planning the strategy can be tricky, and may require professional guidance. In California, estate planning attorneys have extensive knowledge and experience that are relevant to the estate planning process.
Source: thetimesherald.com, "You do not have to pay federal estate tax," Matthew M. Wallace, Aug. 14, 2017