Historically, estate tax minimization is an important aspect of estate planning. Not that it isn’t still important nowadays, but as many of our readers know, the federal estate tax exemption is at an historic high of $5.34 million. That means that many Americans have little or no need of worrying about estate tax liability at the federal level.
At the state level, estate tax liability depends on where you live. States have different laws regarding death taxes and it is important for folks to work with a local attorney. That being said, there has been somewhat of a trend in recent years of states rolling back their estate taxes or increasing exemption amounts. Some states have even chosen to completely abolish death taxes. Maryland is the most recent state to make its estate taxes less burdensome. California, of course, no longer imposes estate or inheritance taxes.
Those with wealth approaching the federal estate tax exemption amount or who are exposed at the state level do still need to be concerned about estate tax minimization. There are a variety of ways the issue can be approached, including making use of various trusts that remove assets from one’s estate, planned annual giving and charitable donations, and making use of intra-family loans.
Whatever methods of estate tax minimization one makes use of, it is important that they serve one’s overall estate planning goals. To this end, it is critical for folks to work with an experienced attorney to ensure that they are considering all angles and not harming other important estate planning goals in their attempt to escape taxes.
Source: Forbes, “Maryland To Cut Estate Tax As Blue States Fall In Line,” March 20, 2014.