Category: Estate Tax Law

Creating a solid, well-thought-out estate plan is meant to protect your estate’s value and make sure your hard-earned assets are passed to your chosen beneficiaries. You can streamline the asset-transfer process by organizing your estate planning documents. Also, having these documents in order will help you avoid unnecessary expenses and delays. In addition, careful tax planning can protect your estate and family members from possibly huge tax liabilities. Although individuals must understand the estate tax laws in Tennessee, people who have extensive assets, high-value estates, and huge business interests can benefit from effective tax-planning strategies. An experienced estate planning attorney from The Ebbert Law Firm can help you understand the implications of estate tax laws on your plans and explain how to mitigate their effects.

Should You Pay State Estate Tax?

An estate tax is paid on your estate’s taxable value upon your death before asset transfer. Calculating the taxable value involves determining your gross estate value’s total and deducting applicable deductions and reductions like spousal property, charitable donations, and qualifying debts. States that charge estate taxes also set an exemption amount. Depending on applicable tax laws, estates with values that exceed such an amount are subject to tax rates on part or all of the estate. If an estate owes estate taxes, its executor should prepare appropriate forms and pay taxes before the rest of the property is divided among beneficiaries. Thankfully, Tennessee doesn’t require estate taxes. But residents in the state must still think about the federal estate tax that applies to estates that exceed specific monetary thresholds.

Tax Planning Strategies to Implement

To minimize your estate’s tax burden, below are strategies to ensure assets are transferred to heirs smoothly:

• In the state, residents do not pay state gift tax. Also, the IRS lets people give a specific amount every year without incurring gift taxes. Thus, you can make systematic gifts to people during your lifetime to minimize your estate’s size, possibly decreasing or eliminating federal tax liabilities. For instance, as of this year, the yearly exclusion per donee is $18, 000. Thus, you can provide assets to any number of people without paying taxes. But the total value given to every donee during the calendar year must not exceed the exclusion amount.
• Setting up different kinds of trusts can help reduce estate taxes and guarantee certain terms for the distribution of assets. For example, placing assets into irrevocable trusts can effectively eliminate them from the taxable estate. Thus, your beneficiaries won’t pay taxes. But trusts are complex, so you must undertake them with the help of a legal and financial expert to make sure your desired outcomes are achieved.
• Charitable donations. By donating to charity, your taxable estate’s size is reduced. Also, this offers a legacy of support to chosen causes. An estate planning lawyer can help determine an effective donation method that suits your goals, finances, and chosen charities. Your options may include charitable remainder trusts, direct donations, starting a foundation, or charitable lead trusts.

Why Engage in Estate Planning Early

A lot of people do not engage in estate planning while they are still young and healthy because they are comfortable with the subject matter or due to the perception that they won’t need such essential documents now. But proactive estate planning with a skilled attorney can be vital to protecting the inheritances of your loved ones. Starting this process early lets you take advantage of all tax planning strategies available to you. It provides you with the chance to create a solid estate plan that has the versatility to grow with you while your life circumstances and financial situation change.