An important part of planning for the administration of your estate in North Royalton includes minimizing your estate’s liabilities that you leave to deal with upon your death. Some expenses, however, might seem unavoidable. Like most, you probably put estate taxes at the top of that list.
Such is the assumption of many of those that come to us here at Kirner & Boldt Co., L.P.A. They end up surprised (just as you may be) to learn that there is a method to limit (or even avoid) estate taxes.
Highlighting the federal estate tax threshold
At the federal level, the government sets an annual estate tax exemption threshold to determine which estates will be subject to tax. According to information shared by the Internal Revenue Service, for 2020 that amount is $11.58 million. If the total taxable value of your estate falls below that amount, your estate will not owe taxes. You can also combine your exemption amount with your spouse to protect as much as $23.16 million. This benefit is not automatic, however, and without the right planning, you could inadvertently push the value of your spouse’s estate above the threshold amount.
Estate tax portability
To avoid this, you need to plan to tax advantage of estate tax portability. You can do this by your spouse filing an estate tax return electing portability within nine months of your death. To take the utmost advantage of portability, you also need to leverage another tax benefit: the unlimited marital deduction (which allows you to pass an unlimited amount to your spouse free of taxes). By leaving your assets to your spouse, you preserve your entire estate tax exemption amount that your spouse can then combine with their own.
You can find more information on managing your estate planning throughout our site.
