Taxes and your estate plan

They say that the only things we can count on are death and taxes. For some people, the former leads to the latter — if they don’t plan ahead properly.

Estate taxes, also known as “death taxes,” are controversial, but they are not an issue for most estates. For the estate of someone who passes away this year, the IRS does not require an estate tax filing unless the value of the estate exceeds $11.58 million. California has its own estate tax, but its exemption is set at the same dollar amount for 2020.

These caps have gone up several times in recent years and probably will continue to rise. So depending on your age, your current wealth, and your future ambitions, you might not have to worry about the estate tax. But only if you use your estate plan to make sure.

What you can do to avoid estate taxes

There could be several options available to you to ensure you can pass on your wealth without estate taxes taking out a chunk. For example, assets in an irrevocable trust are generally not considered part of the estate for estate tax purposes. However, there are potential drawbacks to using an irrevocable trust, including the fact that you cannot make changes to the trust once it is set up. Other options include making gifts to your intended heirs and beneficiaries while you are still alive and placing your home in a qualified personal residence trust.

However you act to avoid estate taxes, your estate planning should reflect your individual needs and your goals for passing along your wealth. The best way to do that is with the assistance of a highly qualified and experienced estate planning attorney.