Estate Tax Planning: Be Proactive and Know Your Options

In Estate Planning, General Financial Planning, Retirement Planning by Chip Hymiller

The federal estate tax generally only applies to those who die with assets that exceed $5,490,000 (in 2017).  While only about 0.2% of the population is subject to the estate tax, those who are impacted can be faced with a significant estate tax liability as the estate tax rate quickly exceeds the 40% mark!

Here is a simple example of how estates are taxed. Lets assume a person passes away in 2017 with $10 million in assets that are included in their taxable estate and will be passed to non-spousal heirs. The federal estate taxes owed would likely exceed $1,800,000!

Given the potential cost of the estate tax, as well as liquidity issues involved with paying the  tax (as many larger estates include illiquid businesses or real estate interests), it is important that high net worth families take a strategic approach to estate planning.

There are a number of tax-reducing alternatives that can be considered including the following:

  • Gifting strategies including both family and charitable options
  • Minority ownership “discounting” on closely held family businesses
  • The use of various trusts to preemptively remove assets from your taxable estate

There are many planning strategies that can be utilized in situations that are tailored to an individual’s personal circumstances and preferences.  If you feel that your estate plan needs to be reassessed, let us know and we can discuss the specifics of your situation and offer some guidance.