How Can I Reduce My Estate Tax Liability?

For individuals with significant assets, estate taxes can take a considerable portion of wealth intended for heirs. Strategic planning can help minimize estate tax liability and ensure more of your assets are passed on.

1. Take Advantage of the Estate Tax Exemption

For 2024, the federal estate tax exemption is $13.61 million per individual ($27.22 million for married couples). Assets below this threshold are not subject to estate tax. Gifting and strategic planning can help keep your estate under this limit.

2. Make Annual Gifts

You can gift up to $18,000 per recipient in 2024 without triggering gift tax or affecting your lifetime exemption. This reduces your taxable estate over time.

3. Set Up a Trust

• Irrevocable Life Insurance Trusts (ILITs) keep life insurance payouts outside of your taxable estate.

• Grantor Retained Annuity Trusts (GRATs) and Charitable Remainder Trusts (CRTs) can reduce estate tax liability while providing income streams.

4. Donate to Charity

Donations made during your lifetime or through your estate can reduce taxable assets. Charitable remainder trusts provide both tax benefits and income for beneficiaries.

5. Use Family Limited Partnerships (FLPs)

FLPs allow you to transfer business assets at a discounted value, reducing your taxable estate while maintaining control over assets.

Final Thoughts: Estate planning ensures your assets are distributed according to your wishes with minimal tax impact. Consult an estate planning professional to structure your plan effectively.

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