How Will the Tax Man Come Around?
Estate planning is a crucial part of financial management that ensures your wealth is distributed according to your wishes upon your demise. An essential aspect of this process, often overlooked, is understanding the tax implications associated with estate planning. This blog provides an informative overview of key tax considerations when mapping out your estate plan.
Federal Estate Taxes
The federal government levies a tax on the transfer of the estate of a deceased person. However, estates below a certain value, known as the estate tax exemption, are not subject to this tax. For 2023, the estate tax exemption is $12.92 million per individual. Anything beyond this exemption is subject to a federal estate tax rate of up to 40%.
State Estate Taxes
In addition to federal estate taxes, many states impose their own estate or inheritance taxes. These state-level taxes may have lower exemption thresholds, meaning your estate could be subject to these taxes even if it's exempt from the federal estate tax. It's crucial to familiarize yourself with the tax laws in your state when planning your estate.
Tax Basis and Step-Up in Basis
Understanding the concept of tax basis and the 'step-up in basis' rule is also crucial. The tax basis is the original value of an asset for tax purposes, usually the purchase price. Upon death, the asset's cost basis is 'stepped up' to its current market value, mitigating potential capital gains taxes for the heirs.
Work With Estate Planning Attorneys
Estate planning is a complex process. By paying attention to these tax considerations, you can ensure that your heirs receive the maximum benefits of your legacy. Always seek professional advice to navigate the intricacies of estate plan tax considerations.
For help navigating estate planning, the team at Marsden Law P.C. is here for you. Let us help you plan your family's future. Learn more or get started by calling (800) 828-7854 or visiting our website.