It's important to come up with a proper estate plan no matter what age you are, since it will help make those important considerations for friends and family if you have an unexpected illness or accident. Officially creating a will can help take care of those important decisions, but it still leaves a big mystery about how estate taxes will be handled. That's why it's so important to understand how taxes will apply to an estate and how to plan for them to be covered so loved ones are not burdened with it.
Totaling Up Your Assets
It's incredibly difficult to place a value on your state if you do not know everything that it includes. While your house and bank accounts are a large aspect of an estate, there are other things you must think about. This includes retirement accounts, your life insurance policy, vehicles, annuities, debts, and any businesses that you own.
An estate planning lawyer can help determine the value of all these items to help better understand the tax implications behind each one.
Selecting The Inheritors
You need to decide on who will receive your assets before you can even start thinking about the taxes that need to be paid on them. Your spouse will be able to receive a special martial deduction, which means that the assets they inherit will not have estate taxes associated with them. Any belongings that go to other people will be taxable assets.
Understanding The Tax Laws
If your estate is valued at under 5.45 million dollars, then you don't have to pay any federal taxes on your estate. Any small business you own can complicate the process very quickly, since the total value of real estate, inventory, and cash on hand can bring you over that IRS threshold.
Keep in mind that you still may have a state inheritance tax that needs to be paid, and it may be lower than what the IRS has defined as the minimum amount at the federal level.
Factoring In Taxes To Inheritances
Any cash that is inherited by a non-spouse will not be an issue when it comes to taxes, since the taxes are simply taken out of the inheritance amount. It becomes much more complicated when assets are inherited, and the inheritor does not have the money to pay for the taxes on that asset. You should work with a lawyer, like those at Skeen Law Offices, to make sure that each inheritor receives the proper amount of cash that will cover the amount of taxes they owe. It will ensure that the items you leave to friends and family are actually received, rather than needing to be liquidated to pay for the taxes.Share