Tim Alles

Jordan Bush

Chris Shourds

Subscribe Button


Previous Newsletters

April 2021 Does My Estate Plan Have An Elephant In The Room? (Part I)


March 2021 How Can I "Trust" My Trustees?


February 2021 What Do Tiger Woods' Tweets, and Your Social Media Content Have to Do with Estate Planning? (Part II)


January 2021 What Do Tiger Woods' Tweets, and Your Social Media Content Have to Do with Estate Planning? (Part I)


December 2020 What Are Estate Taxes And Why Do They Matter?


November 2020 What Life Events Should Trigger an Estate Plan Review?


October 2020 My Child Is A Spendthrift. What Can I Do To Protect Their Inheritance?


September 2020 What Is the Difference Between Estate Planning and Elder Law?


August 2020 Estate Planning After a Divorce - What Does It Mean for Your Estate Plan?


July 2020 What Should You Expect From Your Trustee?


June 2020 Should You Pass Your Assets Through A Trust Or A Will?


May 2020 Important Issues To Consider For Your Estate Plan


April 2020 Important Estate Planning Considerations During a Pandemic Crisis


What Are Estate Taxes And Why Do They Matter?

Untitled 1

You've worked hard your entire life to build wealth to leave to your family. The last thing you want to do is give a large percentage of your assets to the IRS. It is important to be aware of estate tax basics; so that you know whether avoiding estate taxes should be an estate planning priority.

 

What Is An Estate Tax?

 

An Estate Tax, commonly known as a "Death Tax", is a tax that can be imposed by the Internal Revenue Service (IRS), and state governments, on any property or assets that pass to another party upon the original owner's death. This tax can apply to real property titles transferred on death, property passed through a will, beneficiary accounts, and other assets.  The difficult truth is that your hard-earned property and assets might be taxable; thereby reducing the amount that your beneficiaries receive.

 

How Do I know If My Estate Will Owe An Estate Tax?

 

When someone passes away, the executor or personal representative of the estate is responsible for filing final tax returns, which might include filing a separate estate tax return. An executor will need to determine the "gross estate," which is the total of all:

 

  • Real estate
  • Trust property
  • Securities
  • Cash and financial accounts
  • Annuities
  • Business interests
  • Other assets

 

They can then deduct:

 

  • A surviving spouse's property inheritance
  • Mortgages and debts
  • Expenses of estate administration
  • Bequests to qualified charities
  • Other qualified deductions

 

The amount left over is the gross estate for tax purposes, and that determines whether an estate tax return is necessary. For taxable estates, the tax rate will depend on the taxable amount, and state and federal laws.  The return will need to be filed within nine months of the death; which is not a lot of time.

 

The IRS has extended certain deadlines, and provided some relief, in 2020 due to the COVID-19 Pandemic.  It is important to check with your attorney and accountant to see if any of the relief applies to your specific estate.

What Are Estate Tax Exemptions for 2020?

While many states have their own estate tax exemptions, some of which are very low, the good news is that many estates are not subject to federal estate taxes, due to exemptions set out by federal law.

 

In 2017, the Tax Cuts and Jobs Act (TCJA) doubled the estate tax exemptions previously set, and this amount is adjusted each year for inflation. Currently, this means that the following gross estates would be exempt from federal taxes in 2020:

 

  • Estates less than $11.58 million for an individual
  • Estates less than $23.16 million for married couples

 

The value of many estates falls below this threshold, which means federal estate taxes should not be an issue; even though state estate taxes may still be owed. The TCJA is set to expire in 2025, and there is no way to know whether this estate tax exemption will be changed.  

 

Since estate tax laws are always subject to change, it is important to plan. It is best to schedule an appointment with an estate planning attorney who understands the laws in your state, and how they will apply to your specific situation.

Important Information: The information contained in this newsletter, and any related web page(s), is for general information purposed, by its nature, and does not contain any legal or tax advice. It is written to be accurate and educational. This newsletter may not be construed as legal or tax advice, or solicitation for legal or tax services of any kind. For this reason, no attorney-client relationship is created, and no one should take any legal, tax or other action, based on the information contained in this newsletter or any related web page(s), until having consulted competent professional advisor(s) and attorney(s). Some links in the newsletter may lead to other places on the worldwide web, that are for informational references only. We do not necessarily sponsor, endorse or otherwise approve of the materials appearing in such sites. Nothing contained in this newsletter and any related web page(s) is intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties under the Internal Revenue Code. No information contained this newsletter and any related web page(s)relating to any federal tax matter may be used by any person to support the promotion or marketing or to recommend any federal tax matter. Taxpayer(s) should seek advice based on the taxpayer's particular circumstances from an independent tax advisor with respect to any federal tax transaction or matter described in this newsletter and any related web page(s).


Alles Law | 5360 Cascade Road SE | Grand Rapids, MI 49546 | 616-365-5055
info@alleslaw.com | www.alleslaw.com