The excitement Westminster residents feel every payday may often be slightly tempered by the knowledge that Uncle Sam is going to take his share. Taxes are an unavoidable aspect of life, yet does the same hold true in death, as well? It is true that there is indeed a federal estate tax. The prospect of having a portion of their hard-earned estate assets going to the government may be downright disheartening to some. Yet not to worry; there is a way for people to avoid having to pay the estate tax.
First and foremost, many will not end up owing it anyway. Per the Internal Revenue Service, the basic federal estate tax exemption amount currently sits at $10 million. This means that an estate valued at less than that amount will not be subject to the estate tax. Ultimately, very few estates will approach this threshold, allowing most to pass their assets on to beneficiaries without the fear of any being lost to taxes.
In actuality, the total exemption amount is more than $10 million. Forbes Magazine shows that for the 2018, when taking inflation into account, one can actually shelter $11.2 million. A method also exists that allows spouses to combine their exemption amounts to protect as much as $22.4 million from taxation. One simply gifts his or her spouse the entire amount of his or her estate. The surviving spouse then completes an estate tax return the same year the decedent dies electing portability. It is vital that this return be filed; if not, then the surviving spouse’s estate could be subject to tax of the gifted assets push its value above the exemption threshold.