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 you can’t avoid. These are the taxes you would have paid even if you were alive: income taxes. Generally, a decedent’s final individual income tax return is prepared and filed the same as when he or she was 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 is due by April 15th the year after the decedent passed away.
Death taxes, though, actually affect very few people. First, Arkansas has no estate or gift tax; so, all you need to consider is the federal estate and gift tax. The 2022 estate and gift tax exemption amount is around $12 million per individual. One can give up to $12 million while living or after death, and pay no federal estate or gift tax. A married couple will be able to shield $24 million before any estate and gift taxes come due.
However, it is important to note that this $12 million exemption amount will “sunset” at year-end in 2025. When this occurs, the estate and gift tax exemption amounts will reduce by half. So, if you and your family are close to even just $10 million in assets, it would be good 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 issues like this. Or to learn more, check out our website, ElrodFirm.com.