Planning your estate is an important life step and something that you may need to revisit numerous times over the years. Estate planning is closely tied with giving financial gifts during your lifetime and the assistance of an expert is key to make sure you’re making the best gifts and estate plan for your family. You’ll want to review your decisions often due to changes in your personal financial situation, but also due to changes in the law.
For 2017, the IRS has announced that the estate and gift tax exemption is $5.49 million. This means that an individual can leave that amount to heirs and they will not owe any federal estate tax. This threshold matters to wealthy individuals who are trying to shield their assets from the 40% federal estate tax. The state of Minnesota is one of 19 states that also has an estate tax that begins at $1.8 million and the tax rate goes up to 16%. This lower threshold (maxing out at $2 million in 2018), means that estate planning is important for any individual with a high net worth.
One major caveat to keep in mind with the estate and gift tax exemption is that the $5.49 million is the total amount you can give away over the course of your lifetime. Gifts above the exempt amount during your lifetime are subject to a gift tax. These gifts are counted against your total lifetime gifting amount. Spouses can also pool their gifting to give almost $11 million before federal taxes apply by properly filing their tax returns.
Similarly, the 2017 gift exclusion, meaning the amount one individual can gift to one person in a year without them owing any federal gift tax, is $14,000. Gifts can also be made to qualified charities such as educational institutions and medical providers on behalf of others without reducing your exemption. Any further gifts are added together at your death. This amount is then subtracted from the current exempt amount, leaving the value of your estate which will be free from estate taxes. Minnesota does not have a gift tax, so lifetime gifts are not subject to state tax, but only to federal gift tax if they fall beyond the exclusion.
Handling an estate to minimize taxes is one of the main goals of clients and having expert assistance to figure out the best plan and to explain the nuances of the law is important. The attorneys at Virtus Law Firm will take the time to get to know you as a person, understand your goals and your financial situation, and help you create the estate plan that is right for you. We will also help you stay abreast of changes in gift and estate law that may affect your estate plan and help you keep it up to date. Be sure to give us a call at 612.888.1000 or email us at firstname.lastname@example.org. Our team is here to make sure you preserve your legacy and are able to pass on as much benefit to those you love as possible.