When you die in Georgia and have significant assets to your name, you may have to pay estate taxes if your assets exceed a certain amount. Estate taxes have the potential to eat up quite a bit of the legacy you plan to leave behind. However, there are certain steps you might take that may reduce your estate tax burden and enable you to leave more of what you intend behind to your loved ones.
According to Kiplinger, giving away some of your wealth now, while you are still alive, is one effective way to reduce or even potentially eliminate your estate tax burden.
Understanding how the federal gift tax works
Generally speaking, federal taxes come into play any time you give a gift to someone else. However, there is an important caveat. Each year, you have the ability to gift up to a certain amount (the amount often changes year to year) to someone without having to file a gift tax return. If you have a husband or wife, he or she may also do this. You both may gift the allotted amount each year until you die unless it exceeds the lifetime limit, which, in 2021, was $11.7 million.
Understanding how gift-giving reduces estate tax obligations
When you give away $15,000 each year (or $30,000, if both you and your spouse are giving gifts), you effectively reduce the size of your estate each year until you die. In doing so, you either lower your total estate tax obligation or, in some cases, eliminate it entirely.
If you or your spouse hope to gift more than $15,000 apiece in a calendar year, things become a bit more complex.