Could estate planning cut down on tax obligations?

| May 28, 2021 | Estate Planning | 0 comments

Most people’s estates fall below the Internal Revenue Service’s exemption limits, but some are well over the threshold. There are also estates right at the edge of the exemption amount. Taking legal steps to avoid the estate tax might benefit those wishing to protect their beneficiaries from heavy tax burdens. Legitimate tax reduction steps might be helpful when Oregon residents engage in estate planning.

The estate tax exemption limits

The estate tax exemption waives obligations on the first $11.7 million for singles, and the married couple threshold is $23.4 million. Such numbers may change in the future as Congress could modify the law. For now, the law stipulates an annual gift exclusion limit of $15,000, so giving eligible beneficiaries an annual gift could cut down on the eventual financial burden.

Charities may also benefit from someone interested in cutting down taxes due. Donations can reduce an estate, but there are strict rules associated with tax-decreasing philanthropy. Working with a skilled professional may help the estate planner follow the “letter of the law” and avoid audits. There are several ways someone could donate to charity, so careful estate planning may involve looking over these different methods.

Limitations on cutting down taxes

There are only so many tax-reduction steps that an estate planner could perform. If the estate is worth tens of millions of dollars, the beneficiaries might find themselves owing taxes when they receive their inheritance. Making sure beneficiaries know that they will pay taxes could help them prepare. Estate planning steps often involve making things easier for survivors, so ensuring that they are not overwhelmed and alone when dealing with obligations might help.

An estate planning attorney may assist a client who is concerned about their beneficiaries’ potential tax duties. Besides addressing tax issues, the attorney might work with their client to set up a trust, a living will and other useful documents.