As an estate planning attorney, a question that I am asked -- which I used to be asked much more frequently - is what are some pain free ways (translation: not having to hire an attorney) to shield my estate from estate taxes?
Before I directly answer that question, some recent history is helpful. Through 1997, the unified credit was $192,800 which equaled an exemption amount of $600,000 per person. In other words, estate taxes were calculated on the amount of the decedent's assets over $600,000. The following chart shows the growth of the individual credit during the last 30 plus years.
As can easily be seen there has been a significant growth in the amount that an individual can have before his/her estate is subject to estate tax. A married couple has double the amount or $25,840,000 estate tax free.
With that being written, the law is slated to "sunset" on December 31, 2025 and then the exemption reverts to $5.49 million (the 2017 amount) adjusted for inflation.
So, what are some easy things that can be done? Give the money away while alive (must be careful with appreciated assets); leave to charity; utilize the annual gift tax exclusion which in 2023 is $17,000 to give gifts to as many people as one wants; and make payments directly to educational (pay the tuition of grandchildren) and medical providers on behalf of loved one.
Even for extremely wealthy people these are effective ways to reduce the estate tax burden.
Estate Planning and Probate Attorney, Manhattan Beach Local, Sports Enthusiast