When it comes to financial and tax planning and all of the components that come along with it, many people tend to overlook a very important aspect of tax planning: estate taxes. There are instances when an estate must pay tax, and this is something that you don’t want to leave behind as a burden to your family.
Estate Tax Planning Overview
Before you start to worry, know that most estates don’t owe estate taxes, because you can leave or give away a substantial amount of property tax-free. The federal estate tax exemption is $5.45 million dollars, so you’d have to be significantly wealthy for your estate to be imposed an estate tax.
However, there are many people out there who have estates much larger than the exemption amount, and as a result, look for ways to reduce their estate’s tax liability. Here are some things to consider when you are looking for ways to eliminate or reduce your estate tax burden:
- Marital deduction. All property you leave to your surviving spouse is free from estate tax, with the exception of noncitizen spouses.
- Charitable deduction. All property you leave to a (tax-exempt) charitable organization is free of estate tax.
- Rules for married couples. If a deceased spouse does not use all of her individual tax exemption, the surviving spouse can use what’s left. This allows the couple to have twice the individual exemption amount.
If you believe your estate is large enough where estate taxes will be imposed, it’s best to talk to a tax planning professional, who can work with you regarding the different tools available to reduce you tax liability. For more information, contact us today.