Have you ever closed your eyes and spun a globe beneath your fingers and see where it lands? Now imagine how to get there.
These days you can get into your car and plug in a random location into Google maps or Waze on your phone and it will provide you with a map and a set of directions to get to your destination. Without that map you could end up getting lost or running into road blocks and speed traps that could hold you back.
Proper estate tax planning can serve similarly as a map to guide your estate to its destination by avoiding the road blocks and speed traps of federal estate taxes.
Estate Tax Planning Road Maps
There is more than one road to get to your destination. Federal estate taxes and the rules surrounding them are complicated and can easily change with changes in Congressional legislation.
Currently, in 2021, estates with assets in excess of $11.7 million are subject to filing federal estate tax return and can be susceptible to be taxed at up to 40 percent. The estate value threshold fluctuates every year. As the estate tax laws are currently written, the taxable estate value decreases to around $5 million by 2025. If Congress passes new tax legislation, this could change yet again before that time.
There are several ways to minimize federal estate tax burdens. Various techniques can used to protect wealth from federal taxes and your tax estate planning attorney can work with you to create a personalized road map to pass your wealth on with minimal tax roadblocks. Anna M. Price is experienced estate planning attorney licensed in West Virginia (WV), Kentucky (KY), or Ohio (OH) who creates effective estate tax planning strategies for WV, KY, and OH clients.
Mapping a Strategy to Protect Wealth
Just like in Google maps, the directions to your destination will vary based on where you are now. Creating a map to safeguard your estate from federal estate taxes is not only based on current, and ever-changing, laws but also on your individual circumstances. Estate tax planning for someone with a $5 million estate will vary greatly from that for someone with a $50 million estate. A married couple’s estate plan will vary from an unmarried individual. Family size, number of generations, and charitable interests will all have a variable impact on your individual road map to optimal wealth transfer.
Whether you live in WV or OH, which do not assess estate tax, or Kentucky, which bases any estate tax levy on the federal estate tax liability, you can protect your wealth—for yourself, your descendants, or charitable causes—by seeking estate tax planning guidance early in the estate planning process.
Estate Planning Strategies for WV
Several estate planning vehicles are available to minimize potential federal estate your tax burden. Among them are several that I’ve already written about:
- The Unified tax credit incorporates planned annual giving within gift-tax limits both before and after death.
- The creation of family foundations to allocate funds and allow descendants to continue to control the charitable direction of family wealth.
- A charitable remainder trust provides annual income for heirs with any remainder funds going to a designated charitable organization.
- Charitable lead trusts involves the transfer of assets to a charity until the termination of such trust. At that time assets are transferred back to the grantor or to trust beneficiaries.
- Portability estate tax is an exemption benefit for married couples. It allows for the surviving spouse to take advantage of the deceased spouse’s unused exclusion of federal estate tax limits.
These are a sampling of the estate tax planning tactics that can be used to protect individual or family wealth. Any one of these techniques alone can be complex; a good estate plan will use a combination of strategies that are most appropriate to each individual’s starting point to minimize the possibility of federal estate tax burdens.
A Tax Estate Planning Attorney Can Map the Way
The complexity and variables that can determine your risk of incurring a federal estate tax would be difficult to navigate blindly. You would not set out to drive to an unknown destination without a tool such as Google maps, and you certainly should not attempt to circumvent federal taxes without the guidance of a tax estate planning attorney.
Developing an individualized road map to protect the transfer of your wealth is one specialization of estate tax planning attorney Anna M. Price at Jenkins Fenstermaker, PLLC . An experienced estate planning attorney, Anna helps clients establish and maintain comprehensive estate plans in ways that take full advantage of all available tools to avoid or minimize federal estate tax burden. For a consultation, call Anna at (304) 523-2100 or complete this online contact form.