Minimizing Estate Taxes

Aug 25, 2022
Tax Planning
Minimizing Estate Taxes | AmeriEstate Legal Plan

Estate taxes can be a nuisance to deal with. Fortunately there are ways to minimize your estate taxes, and in some cases, avoid it all together.

Federal Estate Tax

 The Federal Estate Tax is a tax on property and assets transferred from a deceased person to their beneficiaries.  Fortunately, most people will not have to pay taxes on an estate. That’s because the Federal Estate Tax only applies to assets over $12.06 million for an unmarried individual and $24.12 million for a married couple.  Any estate that is lower than these amounts is exempt by the IRS.

State Estate Taxes

Even if the value of your estate falls within the federal exemption, the following states, as well as the District of Columbia, impose their own estate taxes:

  • Connecticut
  • Hawaii
  • Illinois
  • Maine
  • Maryland
  • Massachusetts
  • Minnesota
  • New York
  • Oregon
  • Rhode Island
  • Vermont
  • Washington

Tax rates vary from state to state, as do exemption amounts, some of which are as low as $1 million.

Minimizing Estate Taxes

What can you do to minimize estate taxes? Regardless of where you live, there is a way for you to minimize these taxes.  

Spending Assets

 If you’re in a good place financially, something that you can do to reduce your estate tax is spending some of your assets. It is very important that you take your financial situation into account before doing this, because the last thing you want is to overspend. Unlike an expense that can be written off in one year, assets can last years since they tend to be long-term. If you choose to spend assets to reduce your estate taxes, be sure to keep in mind that they are costly and depreciate in value over time.   

Give Gifts to Family Members

Gifting assets is a very effective way to reduce the value of your estate and minimize estate taxes. However, you should take into account that this would entail giving away a portion of your estate while you are still alive. As with spending assets, this is only something that financially stable people should consider. For those who are unsure if they have enough money to sustain themselves for the remainder of their lives, it would not be wise to gift portions of your estate since you would not be able to reclaim it.

If you feel that you are able to gift assets, this would be an excellent way  to provide loved ones with money they may need for  a higher education, starting a business, buying a home, or any number of other worthwhile endeavors.

Should you decide to take this approach, it is also important to be aware of the gift tax. While there is no limit to the number of people to whom you can give gifts to each year, you can only give each person  a certain amount before the gift tax kicks in.  Currently, that amount is $16,000 for the gifts you make yourself and $32,000 for gifts you and your spouse make jointly.

Establish an Irrevocable Life Insurance Trust

Did you know that your life insurance policies count as part of your estate? To prevent life insurance policies from adding to your estate tax, you can set up an irrevocable life insurance trust and transfer ownership of your policies into it.  

Additional Estate Planning Techniques

If you work with the attorneys and other estate planning professionals at AmeriEstate Legal Plan, Inc., you can employ other estate tax minimization techniques, such as these listed below: :

  • Charitable lead trust or charitable remainder trust
  • Family limited partnership
  • Qualified personal residence trust
  • Marital AB trust or marital QTIP trust
  • Private annuity

Bottom Line

There’s no reason for you to pay estate taxes if you don’t have to. Learn how AmeriEstate Legal Plan, Inc. can help you establish a custom-designed estate plan that minimizes your estate tax exposure when you die while benefitting you and your family during your lifetime.

Contact AmeriEstate today. We’ll answer all your estate planning questions and start you on your way to creating the customized estate plan that meets your goals, objectives and needs.