Many people in Georgia believe that federal estate taxes are not something they need to be concerned about because they only affect the very rich. There are some instances in which a person may still be exposed to estate taxes, however.
The issue more commonly occurs with single people than with married ones, as spouses have an unlimited exclusion from estate taxes on assets that pass to them. If a single person has such things as a home, significant life insurance proceeds, healthy individual retirement account balances and other assorted assets, the value of their estate may be pushed beyond the federal estate tax exemption of $5.43 million.
It is important to understand what will be included in the estate. Any life insurance policies over which a person has control or ownership will be included in the estate’s value for tax purposes. Some people establish irrevocable life insurance trusts to transfer ownership of life insurance policies to the trust, thus removing them from the estate. Understanding that if a person receives a significant inheritance from another person that that may also put them over the limit is important.
People who are uncertain about whether they will be exposed to estate taxes, which are currently set at 40 percent, may want to meet with their tax attorney. Tax planning as a part of a person’s overall estate planning process is an important process. With careful planning, a person may be able to help avoid exposure to estate taxes, thereby preserving a larger portion of their estate to pass to their intended beneficiaries as desired. An attorney may help by advising their clients about setting up irrevocable life insurance trusts, avoiding probate and giving gifts while they are still alive in order to help their estate stay under the estate tax exemption threshold.