What is estate tax? Estate tax is a tax levied on the value of a person’s estate after they pass away. It is typically assessed on the total value of assets and property left behind, with certain exemptions and deductions. Estates of decedents who die during 2023 have a basic exclusion amount of $12,920,000 (25,840,000 for married U.S. residents or citizens). In 2024, that exemption will increase to $13,610,000 ($27,220,000 for married U.S. residents or citizens). This means that estates with a total value below this threshold are not subject to federal estate tax. The estate tax rate is 40% for any amount exceeding the exclusion above.
While not all taxpayers may need to do formal estate planning, as they fall below the levels outlined above, we strongly encourage all taxpayers to have a will in order. Please click here to read an article from earlier this year discussing the benefit of a will.
Without further congressional action, these higher limits will be cut in approximately in half, reverting to about $7 million per person and double for a married couple. Please click here to read more about the sunsetting of the estate tax limits.
Estate tax planning is crucial to ensure the smooth transfer of your assets to your heirs. Estate planning considerations may include:
– Updating your will and trusts to reflect changes in your assets and beneficiaries.
– Evaluating the use of lifetime gifts to reduce the size of your taxable estate.
– Exploring the benefits of a revocable living trust for asset distribution.
– Considering charitable bequests and their potential tax advantages.
– Reviewing your life insurance policies to ensure they align with your estate planning goals.
We recommend working with an experienced estate planning attorney to tailor a strategy that aligns with your unique situation and goals, and we would be happy to assist you in ensuring that you maximize the tax efficiency of these plans.