Planning for federal estate taxes

A common question posed to the team here at the Law Offices of Bonnie M. Benson, P.A. is what expenses might face one’s estate upon their death. A major element of estate planning is formulating strategies to avoid these expenses. Yet most assume that they cannot avoid one expense: estate taxes.

Yet this may not be the case. Delaware does not have a state estate tax, meaning that one only need to concern themselves with an estate tax burden at the federal level. Proper estate planning might even allow one to mitigate that expense, as well.

Reviewing the federal estate tax exemption

The federal government sets an estate tax exemption annually. Should the total taxable value of one’s estate fall under this threshold, it is not subject to tax. According to information shared by the Internal Revenue Service, the estate tax exemption threshold for 2022 is $12.06 million.

Married couples also have the option to take advantage of estate tax portability. This refers to the sharing of tax benefits between eligible parties. Through portability, a married couple can effectively double their estate tax exemption to $24.12 million.

Taking advantage of portability

Here’s how: one plans to leave their entire estate to their spouse. This permits those assets to pass on tax-free thanks to the unlimited marital deduction. Doing this also preserves one’s entire estate tax exemption.

Upon their death, the spouse then files an estate tax return (within the same fiscal year) electing portability. This is a vital step, for without it, portability does not automatically occur, and one might inadvertently push the value of their spouse’s estate above the exemption threshold.



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