Five solid ways to prepare for tax changes that could affect your estate


  • Paul Allen, CFP®, MS, is President of Wealth Strategies Partners and can be contacted at [email protected]

As potential tax changes loom, many Americans are concerned about how the proposed legislation could affect their estates and survivors.

Under current law, inheritance tax, also known as death or inheritance tax, has an exemption limit of $ 11,700,000 per spouse, which is expected to increase each year based on inflation. . This means that the estate tax on a net taxable estate of $ 11,700,000 or less is zero, but all of the above are taxable.

Taxable net estate refers to the value of the estate on the date of the deceased’s death, after administration costs and deductions, and bequests to survivors.

The $ 11.7 million per spouse tax exemption will expire on the last day of 2025. After that date, or perhaps sooner if the Biden administration passes its proposed tax legislation, net taxable wealth would be lowered to 3 millions of dollars. The inflation adjusted exemption in 2026 is expected to be between $ 6 million and $ 7 million.

In addition, the current maximum rate of gift and inheritance tax of 40% will increase to 45% in 2026, which is taxed on the fair market value of all assets assessed at death.

We can’t know when we or our loved ones will die or what the laws will be at that time, but there are ways to prepare and protect your estate now. Consider taking these 5 steps to mitigate the effects of potential inheritance tax increases.

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Meet a Certified Financial Planner and Estate Planning Lawyer

Enlist the advice of a certified financial planner to make it easier to navigate complicated financial situations. Your financial planner can also work closely with an estate planning lawyer and develop strategies to maintain stability in times of uncertainty. The collaboration of these professionals will help determine the best course of action for the future of your estate.

Make sure the assets are titled correctly

It is not enough to just have a will. The future of your assets depends on how they are titled. There are several ways to give title to your assets, including joint ownership, transfer on death, payment on death, and surviving marital property. For your survivors to benefit from the exclusions, proper ownership of assets is essential and depends on your individual financial situation and family dynamics.

As with the rest of your estate plan, it should be reviewed regularly to take into account major life changes such as marriage and divorce that may affect the title.

Make charitable donations

Consider making charitable contributions. By supporting causes that are important to you, you will take money out of your estate, which will reduce the likelihood that you will not escape the exempt benchmark. As long as the gift is given to a qualified 501 (c) 3 organization, there is no payment of estate taxes on the gifts.

There is also no limit to the amount you can donate.

You have two options when it comes to making contributions through charitable trusts: Master Charitable Trusts and Residual Charitable Trusts. Major charitable trusts simply hold assets that will eventually be passed on to a tax-exempt charity.

With a charitable remainder trust, you can transfer stocks or other valuable assets to an irrevocable trust.

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Give gifts to your loved ones

You can offer up to $ 15,000 to as many people as you want each year without involving the IRS. The exclusion is calculated by recipient and not by the total sum of all gifts. If you give more than $ 15,000 to the same person, you will have to file an income tax return, but you will not necessarily be taxed for giving more.

Establish irrevocable trust

An irrevocable trust has terms and provisions that cannot be changed by the settlor and minimizes the tax implications by removing the assets of the trust from your taxable estate. Income generated by assets is not subject to personal income tax. When properly installed, they can significantly reduce the size of a domain. Enlist the help of an experienced wealth advisor to help you establish the right trust and that it is properly established.

We don’t know which of the proposed tax changes will become law, if any, but it is wise to start planning now. Enlist the support of trusted professionals to protect your assets – and your future.

Paul Allen, CFP®, MS, is President of Wealth Strategies Partners and can be contacted at [email protected]

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