With the new school year approaching and your child heading off to college, you've likely…
When it comes to estate planning—and securing your family’s future—there are many things to keep in mind. Drafting a will or setting up a trust, completing your health care documents, and updating the beneficiaries on your accounts are some of the most important steps in the process. Nonetheless, for all your careful planning, if you don’t take into account the possible tax burden, all your hard work can go for naught. Tax planning is an essential, but often overlooked, component of looking out for your family’s future.
Estate Planning and Taxes
Like many states, Missouri does not impose a state estate tax on the transfer of assets, but larger estates may still be subject to a federal tax. As of 2023, the federal tax applies to estates worth over $12.92 million. If you have a large estate, any amount over the threshold will technically be taxed at the highest rate of 40 percent. Luckily, though, there are things you can do to help ease the tax burden and pass on as much of your hard-earned assets to your loved ones as possible.
Tax Planning Strategies
Two of the most common of these tax planning tools are gifting your assets during your lifetime and setting up an irrevocable trust. Gifting assets to your heirs is a great way to avoid falling prey to a sudden tax burden after you pass on. Legally, each person is allotted a $17,000 annual exclusion limit, which means you can give up to $17,000 to each heir every year without any tax penalty. If you are married, you and your spouse can give a combined $34,000 to each heir.
When it comes to setting up a trust, there are many different types to consider, each of which have their own advantages when it comes to reducing the tax burden. For example, a grantor retained annuity trust (GRAT) allows you to put certain assets into the trust and then freeze their value. This is especially useful for assets expected to appreciate in value, as you can avoid paying taxes on the increase. In addition, putting assets into a trust allows you to transfer them to your heirs without having to go through the burdensome probate process.
Contact the Law Firm of Christopher W. Dumm
If you have any questions about how tax laws may affect your estate plan, please do not hesitate to reach out to the Law Firm of Christopher W. Dumm. We have many years of experience helping people secure their family’s future and we’re here to help. Give us a call at 417-623-2062 or fill out the contact form below to get started.