Taxes are a constant throughout our lives, and it seems like there’s no way to avoid them – even when we die. Estate taxes sound intimidating, but you shouldn’t worry about them just yet. In fact, in a refreshing twist, some people won’t have to pay estate taxes at all.
But what are estate taxes? And why do some people have to pay them while others seem to avoid them altogether? As an estate planning lawyer in Sacramento CA from a firm like Yee Law Group, P.C. can explain, doing a little research can give you a lot of peace of mind. Read on to learn more about estate taxes, and how they affect you.
About Estate Taxes
Estate taxes are sometimes derisively referred to as “death taxes”, and for good reason. When you leave behind an estate, you’d think that your beneficiaries would get whatever you’ve left behind for them. However, if your estate qualifies for estate taxes and you pass away, a large portion of your assets will be burnt up by the estate tax.
There are a few different types of estate taxes. There are federal estate taxes, state estate taxes, and estate taxes on inheritances. The amount you (or more specifically your estate) will have to pay depends on the state. Some states don’t have estate taxes at all, while other states will demand up to 40% of your estate’s total value.
As an added hurdle, the total value of your estate is determined by the current value of all of your assets, not what you paid for them when you first purchased them. Got a collection of appreciating assets that blew up in value recently? Better watch out for the taxman.
The Bright Side:
This all sounds pretty scary, and if you’ve read this far, it’s understandable to feel pretty frustrated. However, there’s one golden rule that spares everyday Americans from estate taxes. Estate taxes only affect you if your assets are worth more than $11.70 million.
That’s right. Even if you have $11,699,999.99 in assets, you won’t have to pay a cent of estate taxes. And this might give you an idea of how the wealthy avoid estate taxes when they die…
How the Wealthy Avoid Estate Tax
There are a number of tried and true methods used to avoid paying those hefty estate taxes. The best strategy is to reduce the value of the estate below that magic $11.70 million threshold. For example, wealthy people might give away assets while they’re still alive, or they might spin off their money as investments in businesses owned by their heirs. Some individuals open up charitable trusts or foundations as a means of avoiding estate taxes as well.
There’s also a growing political sentiment to get rid of estate taxes altogether. Whether you support estate taxes or not, their future in the United States is up for debate, and – once again – if you live outside of one of those 17 states (and D.C.) you won’t have to worry about estate taxes at all.
Get in Touch with an Estate Planning Lawyer Today
Whether you’re worried about estate taxes or not, you should still take the time to plan out your future and get in touch with an estate planning lawyer. While estate taxes only affect those with more than $11.70 million in assets, there are plenty of other concerns you might have about what you’ll leave behind for your family and friends after your death. Reach out to an estate planning lawyer today to learn more about planning your future.