State and federal governments impose taxes on estates where the total value of the estate is over a pre-determined amount. One important aspect of estate planning includes whether pre-death gifts should be made, to loved ones and charities, in order to lower the eventual tax liability of the estate. This is an important matter to discuss with your tax professional and estate planning attorney. Remember, state exemptions and taxable amounts vary and must be considered, as well.
The (federal) lifetime tax exemption is the total amount of funds you may give, over the course of your lifetime, without ever having to pay a gift tax on it. Therefore, this allows you to reduce the total value of your estate to avoid potential after-death estate taxes.
For many years this was a primary consideration for many people engaged in estate planning. However, the total federal exemption amount has risen significantly over the last several years.
Estate planning and gift exemptions
As of this writing, in 2020, the lifetime gift tax exemption is $11.58 million. This means that you can give up to $11.58 million in gifts over the course of your life without ever having to pay a gift tax on it. For married couples, both spouses get the $11.58 million exemption. In many cases, this amount can be applied against the estate, after death. This allows you to lower the estate exposure to estate taxes. In other words, the exemption applies where gifts were made before death or is applied to the value of the estate after death. These issues are particularly relevant when probating an estate. Again, please, consult with your tax professional and attorney when considering these aspects of estate planning.
The Whipple Law Group stands ready to respond to your thoughts and questions regarding estate planning. Please feel free to call us, free of charge, at 509-869-3223.
