Estate and Gift Tax Planning

The federal estate tax, sometimes referred to as the death tax, is assessed on all assets you own or control at death.  The good news is starting in 2018, the federal estate tax exemption amount was increased to a little over $11 million per person, indexed for inflation.  Total assets over that amount may be subject to a 40% estate tax, and if you try to skip a generation, there can be another 40% generation skipping transfer “GST” tax assessed.  There are strategic tax planning options to help reduce, and in some cases, completely avoid such taxes.  Planning options can include gifting programs, setting up irrevocable trusts, and working on valuation issues in association with closely held businesses and real estate ventures.  However, avoiding estate tax is not the only goal.  There is an interplay between income tax planning and estate tax planning and they need to be coordinated.  Obtaining a “stepped-up” tax basis at death may help your heirs minimize income taxes when they sell assets after your death.  We assist with taxable estates, or estates getting close to the taxable limits, with a variety of gifting options, including outright gifts, gifts to 529 accounts or irrevocable trusts, including Crummey withdrawal notices, UTMA accounts, ABLE accounts, and other alternatives.  The taxpayer may be required, or it may be beneficial, to disclose such gifts on a gift tax return, IRS Form 709.  An estate tax return, IRS Form 706, is required if a deceased person has a taxable estate.  However, there are other benefits and possible protections in filing an estate tax return, even when a taxable estate does not exist.  We work with the executor or trustee to advise on the pros and cons of filing such returns and proper disclosure of assets and related valuation.  An estate tax return must be filed to “port over” the unused exemption amount to a surviving spouse, sometimes referred to as the DSUE, even if an estate tax return is not otherwise required.