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Planning to avoid estate taxes

| Jan 26, 2019 | Estate Planning |

The primary motivation for many in Saint Charles to engage in estate planning is to ensure that all of the assets that they have worked so hard to accumulate throughout their lifetimes are able to benefit their chosen beneficiaries. However, there may be a concern amongst many that after having expended such effort, much of their estate will end up having to be paid in taxes (living little to pass on to heirs). Estate taxes are one of the most misunderstood aspects of the estate planning process, and thus much misinformation exists about this potential liability. Most will be pleased to learn, however, that with a little advanced planning, one might avoid having their estate taxed at all. 

A federal estate tax threshold has been established to determine which estates will be made subject to tax (Missouri does not levy its own estate tax). Per Forbes Magazine, that threshold has been set at $11.4 million for 2019. If the total taxable amount of one’s estate is below this threshold, it will not be taxes. Indeed, because of the estate tax threshold, only a small number of estates are ever taxed at all. 

Married couples can combine their estate tax exemptions through a process known as portability (which can allow them to protect as much as $22.8 million). To take advantage of this, the surviving spouse must submit a federal estate tax form 706 to the Internal Revenue Service within nine months of their spouse’s death. Those estates tax returns that are submitted solely to elect portability can be granted a six-month extension if the one filing it requests additional time within that nine-month window.