Lindsey, How do I protect my family when I pass away so that all my money won’t go to pay death taxes? – Keisha
Keisha, this is actually a very common question. First, there are some taxes that cannot be avoided. These are the taxes that you would have paid even if you were alive – income taxes. In general, the final individual income tax return of a decedent is prepared and filed in the same manner as when they were alive. All income up to the date of a person’s death must be reported and all credits and deductions to which the decedent is entitled may be claimed. This return must be filed by April 15th the year after the decedent passed away.
When it comes to death taxes, though, very few people are actually affected. First, Arkansas has no estate or gift tax; so, all you need to be concerned with is the federal estate and gift tax. The current estate and gift tax exemption amount is $11.4 million per individual, up from $11.18 million in 2018. That means an individual can give a total $11.4 million dollars to heirs, either while living or after they pass away, and pay no federal estate or gift tax. Similarly, a married couple will be able to shield $22.8 million before any estate and gift taxes are due.
However, it is important to note that this $11.4 million exemption amount is set to “sunset” at year-end in 2025. When this occurs, the estate and gift tax exemption amounts will be cut in half. So, if you and your family are even close to $10 million in assets, it would be a good time to visit with an estate planning professional about how to take advantage of the full exemption amounts in place now.
Call today to set up a no-charge strategy session to find out how we can help with issue like this. To learn more, check out our website, ElrodFirm.com.