What are estate taxes?
Estate taxes are taxes levied on the net value of the estate of a deceased person before distribution to the heirs. Estate taxes are separate from, and in addition to probate expenses, which can be avoided with a revocable living trust, and also from final income taxes, which must be paid on income you receive in the year you die.
Federal estate taxes are expensive (40%) and they must be paid in cash, usually within nine months after you die. Because few estates have the cash, it has often been necessary to liquidate assets to pay these taxes. But, if you plan ahead, you can reduce and even eliminate estate taxes.
Who has to pay estate taxes?
Your estate will have to pay federal estate taxes if its net value when you die is more than the exempt amount set by Congress at that time. In 2017 the federal exemption is $5.49 million (adjusted for inflation) and the tax rate is 40%.
How is the net value of my estate determined?
To determine the current net value, add your assets, and then subtract your debts. Include your home, business interests, bank accounts, investments, personal property, IRAs, retirement plans and death benefits from your life insurance.
How can I reduce or eliminate my estate taxes?
In the simplest terms, there are three ways:
Below is a bit more detail about each of the three ways you can either reduce or eliminate your estate taxes. Contact Evans Case, LLP to speak to a skilled estate planning attorney if you have any further questions.
If Married, Use Both Exemptions
Living Trust with Tax Planning
Remove Assets From Estate
Make Annual Tax-Free Gifts
Transfer Life Insurance Policies to Irrevocable Life Insurance Trust
Qualified Personal Residence Trust
Grantor Retained Annuity Trust / Grantor Retained Unitrust
Limited Liability Company / Family Limited Partnership
Charitable Remainder Trust
Charitable Lead Trust
Buy Life Insurance
Through Irrevocable Life Insurance Trust
Sadly, there are ways in which the after death distribution of a deceased person’s estate could end up very differently from the deceased’s goals for the distribution.
So, failure to take into account potential tax implications and other relevant factors in estate planning could have many negative effects. This is why solid legal advice is such an important thing to have when forming wills and doing other estate planning. Skilled estate planning lawyers at Evans Case, LLP can help individuals with identifying many important factors to take into account when estate planning.
Call us today – 303-757-8300 – to set up your FREE consultation to discuss your estate plan!
Managing Partner at Evans Case
Evans Case is a full-service Denver Law Firm. With more than 110 years of collective experience we are relentless and compassionate advocates for our clients. The deep legal experience and wisdom of our senior attorneys combined with fresh thinking of younger associates ensure the best possible results in each case. Our attorneys understand that the best outcomes are built on thorough understanding, compassion, and respect.