No one looks forward to paying taxes, and Delaware residents are no exception. Some people face the possibility of paying taxes even after they die through the assessment of federal estate taxes, which they may consider worse than paying them while alive. Fortunately, the appropriate estate planning may reduce — if not eliminate — the need to pay those taxes.
Many Delaware residents with a significant amount of wealth could make use of the annual gift tax exclusion. This allows individuals to give gifts to others up to $14,000 each without the need to pay taxes or file a gift tax return. If married, that amount could increase to $28,000 per person without incurring taxes, but the filing of a gift tax return is required.
Another useful tool to avoid federal estate taxes is portability, which falls under the marital exemption. The IRS allows all or part of one spouse’s estate to pass to the surviving spouse without incurring any federal estate tax. As an added gift to spouse left behind, any unused portion of the deceased spouse’s federal estate tax exemption (which is $5,490,000 per person or $10,980,000 per couple for 2017) can be transferred to the surviving spouse. This will help decrease the amount of his or her taxable estate upon death.
Taking advantage of these strategies often requires the advice and assistance of an estate planning attorney. He or she can help devise a strategy that maximizes the applicable exemptions and allows loved ones to receive as much of their inheritances as possible without losing a significant portion to federal estate taxes. Addressing this and other issues as soon as possible could provide everyone involved with some much needed peace of mind.
Source: statefarm.com, “Federal Estate Tax,” Accessed on July 22, 2017