Planning for federal estate taxes

| Jan 8, 2021 | Estate Planning |

Like most people in Georgia, you likely assume that the government will levy taxes against your estate upon your death (thus decreasing the assets you have to pass on to beneficiaries). Yet just as it is for many of those that come to us here at the Emert Law Firm, it may come as a surprise to you to learn that is not necessarily the case.

Past posts on this blog detailed the fact that Georgia no longer imposes an estate tax on its residents. This means that the only potential tax liability you need to worry about comes from the federal level.

Reviewing the federal estate tax exemption

Yet there may even be a way through which you can avoid federal estate taxes, as well. A federal estate tax exemption exists that lawmakers revise every year. Per the Internal Revenue Service, the federal estate tax threshold for 2021 is $11.7 million. If the total taxable value of your estate comes in under that amount, your estate will not be subject to tax.

Understanding estate tax portability

You can potentially extend your federal estate tax exemption even further through the process of estate tax portability. Tax portability refers to the sharing of tax benefits. In the case of estate taxes, you can share your exemption benefits with your spouse. Yet taking advantage of this process to the utmost requires careful planning (as failing to do so could push the value of your spouse’s estate above the threshold). Leaving the entirety of your estate to your spouse preserves your estate tax exemption (thanks to the unlimited marital deduction), which your spouse can then claim by filing an estate tax return electing portability.

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