Putting together a comprehensive estate plan involves a variety of considerations and potential goals. These can include leaving behind property for surviving family members, ensuring sound succession of leadership for a family business, giving to charity, and ensuring there is enough money to pay off creditors.
Another important goal for those engaging in estate planning is to reduce tax liability where possible. Estate and inheritance taxes are levied at both the federal and state level. Right now, the federal estate tax exemption is at 5.45 million, so that individuals may leave that amount of property behind without incurring federal estate taxes. That doesn’t mean, of course, that those with less than this amount need not worry about tax planning, since they may also wish to help loved ones avoid their own tax liabilities down the road.
In addition to federal estate taxes, there are also state estate taxes to consider. Here in Massachusetts, the exemption amount is $1 million, much lower than the federal exemption.
Those who own property in amounts exceeding state and federal tax exemption amounts should know that one of the goals of estate planning is to come up with effective strategies which reduce the amount of federal and state estate taxes owed. It is important, though, to ensure any such strategies fit within an overall plan that will accomplish one’s goals for estate planning. Reducing tax liabilities is important, but isn’t the only factor to consider in putting together an estate plan.
Those who hope to minimize their estate tax liability should know that doing it alone can be a real challenge, and that working with an experienced attorney can help ensure things are done correctly and to the greatest benefit for one’s estate.
Sources:
Kiplinger, “More States Giving Heirs a Break on Estate Taxes,” Sandra Block, Jan. 4, 2016.
Massachusetts Department of Revenue, “Estate Tax,” Accessed Jan. 15, 2016.
