Orange residents with an interest in estate planning may wish to know about some of the important tax exemptions related to estates. These may help to reduce the taxes that must be paid from the estate at the time of a person’s death.
In 2015, federal tax law allows an exemption from estate tax for the first $5.43 million of a person’s estate that is passed on after their death. This number is increased by 100 percent for a married couple, bringing the total to nearly $11 million in estate tax exemption. In addition to this, the law allows for the same amount of exemption from gift taxes. This second exemption is cumulative over a person’s lifetime, and enjoys the same doubling for a married couple.
When a person’s estate is valued at over this threshold and they still wish to avoid estate taxes, there is a third law that often proves helpful. Each year, the first $14,000 given as a gift to an individual is excluded from being counted when calculating both estate and gift taxes. Those with larger estates may be able to avoid inheritance taxes by giving small amounts to multiple individuals every year throughout their lifetimes. This reduces the overall taxable estate and benefits the inheritors. Since those receiving the gifts probably have a lower tax bracket, there is an overall reduction in tax liability.
Tax issues can be quite complicated, particularly when complex estate plans are concerned. An attorney familiar with estate planning may be able to help explore strategies for minimizing the tax implications that come from passing down an estate to loved ones. The attorney may also be able to assist with drafting estate planning documents and taking care of estate administration duties in order to put the plan into action.