Taking the time to think about estate planning issues now may make it easier to create a plan that meets an individual’s needs. When coming up with such a plan, it is important to consider how estate and gift taxes may influence an estate’s assets.
For example, it is important to know that each person has a $5.43 million estate-tax exemption. This means that an individual can give up to $5.43 million to friends, family members or other entities without paying federal estate tax. The exemption may be double for married couples as a spouse’s unused exemption may transfer to a surviving spouse. Each individual also has a $5.43 million gift-tax exemption, which could reduce an individual’s estate, helping to avoid meeting the estate tax threshold during their lifetime.
The $14,000 annual gift tax exclusion might also be a useful tool for avoiding unnecessary taxation on a large estate. The handouts do not apply to the total $5.43 million gift-tax threshold and may be made annually. Using this strategy, a benefactor may be able to reduce the size of the total estate slowly, avoiding paying excess taxes.
Those who are concerned about estate taxes and other estate planning issues may wish to consult with an attorney. An attorney may be able to help create a plan that allows future generations receive their inheritance in a tax-efficient manner. In addition, the attorney might also be able to draft documents that relate to end-of-life planning and power of attorney, helping the client create a comprehensive estate plan.