Hyden, Miron & Foster, PLLC Law Blog

Monday, June 22, 2020

Tax Considerations While Estate Planning

In order to maximize the vast benefits of estate planning, there are many different considerations one must take into account. You must reflect on who you want to leave your assets to and you must take a hard look at the best way to do this. Yes, there are many different ways to pass on an inheritance to your beneficiaries. In order to decide which transfer method works best, there are several factors to consider. One important factor is the tax implications for your transfer method. Taxes at both the federal and state level can have a significant impact on how much you are able to pass on to your heirs after you die. It is definitely worth taking a look at what tax considerations you should factor in when establishing your estate plan, especially if you have a higher net worth estate.

Tax Considerations While Estate Planning

There are several taxes that you should consider when estate planning. One such tax is the federal estate tax. This tax may be imposed on the value of your taxable estate at your time of death. There are several exemptions that may have taken place so that some of the estate value is not subject to the federal estate tax. For instance, the exemption amount is the amount that each decedent can transfer free of being subjected to the federal estate tax. As of 2019, the exemption amount is $11.4 million per U.S. decedent. Transfers that fall above the exemption amount, in addition to other exemptions that may be taken, will be subject to the tax rate that is in effect for the relevant year.

In addition to the federal estate tax, there is also the fight tax that should be considered. Gift taxes apply when you make gifts during your lifetime that are in an amount exceeding the exemption amount. As of 2019, a person is able to transfer up to $15,000, $30,000 per married couple, to an unlimited number of gift recipients without being subjected to the gift tax. When properly employed, gifting assets during your lifetime as opposed to upon your death can be an effective strategy for transferring wealth without being subject to excessive taxation.

The generation-skipping transfer (GST) tax may also come into play when you are estate planning. The GST tax may come into play should you transfer assets to a person who is two or more generations removed from you. For instance, the GST tax may be applicable if a grandparent skips a child in favor of making a gift to a grandchild. It may also be applicable should the grandparent set up a trust for a grandchild when the child’s parents are still living. Like the gift tax, there are exemptions from the GST tax. However, when applicable, the GST tax will inflict a tax penalty at the highest federal tax rate and so it is worth taking a look at how you may be impacted by any transfers subject to the GST tax.

In some states, those going through the estate planning process will need to take into account state taxes such as a state estate tax and a state inheritance tax. Arkansas does not have an estate tax. Additionally, Arkansas does not charge an inheritance tax.

Estate Planning Attorneys

The estate planning and tax attorneys at Hyden, Miron & Foster are committed to maximizing the value of your assets and wealth. We will develop an estate plan that works to ensure you pass as much of your wealth along to your loved ones as possible. Contact us today.


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