What taxes will affect my estate?
Taxes do not end at death. There is the potential for the estate you leave behind to also be taxed. However, the steps you take in the current moment to mitigate estate taxation sets the stage for your loved ones to receive as much of your hard-earned money and other assets as possible. Without further ado, let’s take a quick look at the taxes that have the potential to be applied to your estate.
Federal and State Estate Taxes
The federal estate tax is applicable to estates of individuals who pass away if the estate is valued in excess of $11,580,000. However, this figure will change as time progresses due to inflation. Furthermore, there are state estate taxes in more than a dozen states. Louisiana is not one of those states.
Gift taxes are regularly ignored yet they are quite important in the context of estate taxation. The current federal tax code exempts upwards of $15,000 each year in gifts made by a person to others. This exemption is known as the yearly exclusion from gift taxes. If a gift of more than $15,000 is made in one year to the same individual, a taxable gift has been provided, incurring a subsequent gift tax.
The federal tax code provides the lifetime exemption for gift taxes of $11,580,000 as noted above. This exemption is used to offset the value of taxable gifts. As an example, consider a parent who provides a child with $114,000 to use toward a down payment on a home. The initial $15,000 of this money has no consequence yet the next $100,000 gifted is viewed as a taxable gift. When the gift is made, there is essentially a coupon of $11,481,000 remaining.
Reporting Taxable Gifts
Taxable gifts provided during the year are to be reported through the IRS Form 709, also known as the United States Gift Tax Return. This form is to be filed by the day income taxes are due on the year after that in which the gift was provided. It must be noted Louisiana abolished the state’s gift tax on the first day of July in 2008.
Generation Skipping Transfer Tax (GST)
The generation skipping transfer tax is applicable to transfers in excess of $11,580,000 that skip a generation or several generations. Often referred to as GST, this tax’s dollar ceiling noted above is applicable to the year 2020 and has the potential to increase as a result of inflation in the years ahead. In the context of estate taxes, “skipping” is a reference to a transfer made to a relative who is two or even more generations below the decedent’s generation. As an example, skipping refers to a grandchild of a grandparent as opposed to the son or daughter of a parent. Skipping also refers to a non-family member who is in excess of 37.5 years younger than the individual in question.
Contact Niswanger Law Today
Niswanger law is here to help you minimize your tax burden as well as that of your family members in the context of estate planning. Reach out to us today to find out more about our legal services in Monroe LA. You can reach us by phone at 318.953.0071 or by filling out our contact form.