Understanding estate taxes

first_img 90SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr,Ed SanFilippo Edward J. SanFilippo is a freelance writer, editor, and researcher with expertise across a broad range of topics. He has nearly 20 years of experience writing for public agencies, private … Web: www.financialfeed.com Details According to the IRS, estate taxes are a tax on a person’s right to transfer property at their death. In plainer English, this is a tax levied on the net value of a deceased person’s estate before the distribution of inheritance. For most people, the federal estate tax is not pertinent since you can leave or give away up to $11.4 million before the tax is applied. If your estate exceeds this amount, reducing your estate taxes can increase the allocations to your heirs. Here are a few strategies to consider:Transfers to your spouse: Lifetime gifts and bequests at death to your spouse are not generally subject to estate taxes. Note, however, that these transfers are eventually counted toward your spouse’s taxable estate.Lifetime gifts: Individuals can make an annual gift of $15,000 to each child or grandchild without incurring a gift tax. Couples can collectively gift an annual sum of $30,000 per recipient without incurring a gift tax, which can equal a sizable transfer over time.Transfers to minors: Gifts to your minor children will be given to a custodian, with distributions to the child when they reach the age of majority. These gifts are subject to the same annual limits as the lifetime gifts noted above.Charitable transfers: Gifts to charities upon death can reduce the size of the estate, thus reducing the estate taxes. Alternatively, gifts to charities prior to death can trigger income tax deductions, which could facilitate transfers to spouses and lifetime gifts to children and grandchildren.These are just a few of the ways you might consider reducing your estate taxes. Working with the financial advisors at your credit union can help you implement the decisions that make the most sense for your circumstances, even if you do not believe your estate will be subject to these taxes. And remember, some of these standards (such as the maximum annual amount for lifetime gifts) change periodically, so making sure you stay updated can also help you maximize your efforts.last_img