The estate tax is a tax on the value of a person’s assets at the time of their death. Upon your death, if the total value of your estate is above a certain threshold amount, known as the federal estate tax exemption, the IRS requires your estate to pay a tax, known as the estate tax, before any assets can be passed to your beneficiaries.
As of 2022, the federal estate tax exemption is $12.06 million for individuals ($24.12 million for married couples). If you die in 2022, and your assets are worth $12.06 million or less, your estate won’t owe any federal estate tax. However, if your estate is worth more than $12.06 million, the amount of your assets that are greater than $12.06 million will be taxed at a 40% tax rate.
You can reduce your estate tax liability, or even eliminate it all together, by using various estate planning strategies. Most of these strategies are fairly complex and involve the use of irrevocable trusts, but such strategies are without question worth it, if you can save your family such a massive tax bill.
The Future Estate Tax
The current $12.06 million estate tax exemption is set to expire on Jan. 1, 2026, and return to its previous level of $5 million, which when adjusted for inflation is expected to be around $6.03 million. Here’s one thing we know for sure: We don’t know what the estate tax exemption will be at the time of your death, and we also don’t know what the value of your assets will be at the time of your death. Because of this, when you plan with us, we will ensure that we put in place planning strategies to protect your estate from estate taxes, regardless of the amount of the estate tax exemption or the size of your assets.
CKLH Is Here For You
To avoid these tax consequences, you should meet with the experiences trust and estate planning attorneys Cottle Keen Lopiccolo & Heyde, LLP to learn how planning now could lessen the tax consequences to your beneficiaries.
To schedule your Family Wealth Planning Session, please call (714) 997-7870, or click here to contact CKLH by email.