Strategies to Reduce or Eliminate a Death Tax

On behalf of Law Offices of Frye, Fortich & Garcia, P.L. | December 15, 2022 | Estate Taxes

Estate tax, also mistakenly referred to as inheritance tax or death tax, is a tax on the assets of an individual that has died. Inheritance itself is not a taxable event, as the tax is paid by the estate of the deceased based upon the value of the decedent’s assets at time of death. In the United States, estate tax is levied by the federal government and a few state governments.

There are several strategies that can be used to minimize or eliminate estate tax, depending on the size of the estate and the individual’s goals. Some options include:

1. Making gifts: Gifts made during an individual’s lifetime are not subject to estate tax. However, gifts might be subject to a gift tax and there are limits on the amount that can be gifted tax-free each year.

1. Using exemptions: The federal estate tax has an exemption amount that allows an individual to leave a certain amount of assets to their heirs without incurring estate tax. The exemption amount is subject to change from year to year, but for the 2023 tax year, it is $12.92 million per individual.

1. Setting up one or more trusts: A trust is a legal arrangement that allows an individual to set aside assets for the benefit of another person or entity. There are several types of trusts that can be used to minimize or sometimes eliminate estate tax, such as charitable trusts, bypass trusts, and credit shelter trusts.

1. Using life insurance: Life insurance proceeds are generally not subject to estate tax, so an individual can use life insurance to provide financial resources to their heirs without incurring estate tax or utilize insurance policies to establish liquidity to help pay for any estate tax obligations.

It is important to note that estate tax laws can be complex and may change over time, so it is advisable to consult with an estate planning professional to determine the best strategy for minimizing or eliminating estate tax for a specific situation.

Contact an Experienced Estate Planning Law Firm

The attorneys at Frye, Fortich & Garcia, P.L. have helped thousands of clients with their estate planning. With sound guidance, we have preserved their wealth and legacy seeing to it that their wishes were met. Contact us as 305-931-3200 or email us through our website to schedule a confidential consultation and answers to all your questions.