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Planning for the potential of estate taxes

On Behalf of | Jul 5, 2021 | Estate Planning

As you work to prepare your estate plan in Indiana, you begin to notice opportunities to preserve assets from standard administrative processes that might otherwise take away from the personal wealth you hope to pass on to your beneficiaries. These may include the chance to avoid probate, and the possibility to settle debts prior to your death.

However, many come to us here at Dale & Eke expecting that one unavoidable estate-related expense is estate taxes. Yet is that the case? Indiana does not levy a local estate tax on residents, meaning that the only tax obligation potentially facing your estate comes from the federal level.

The federal estate tax exemption

With careful planning, you may even be able to mitigate (or perhaps avoid) that expense altogether. The federal government offers an estate tax exemption that allows many estates to avoid a tax obligation. Per the Internal Revenue Service, that estate tax exemption amount for 2021 is $11.7 million. Thus, if the total taxable value of your estate comes in under that amount, it will not be subject to tax.

Estate tax portability

You may even be able to extend that exemption amount even further (thanks to estate tax portability). You and your spouse can essentially share your estate tax exemption amounts. You may leverage this fact to effectively double your estate tax exemption (to $23.4 million). All you need to do so is plan to leave your entire estate to your spouse. This would pass tax-free thanks to the unlimited marital deduction. You (or your ex-spouse) can then claim the other’s unused estate tax exemption by filing an estate tax return electing portability.

You can find more information on optimizing your estate planning throughout our site.


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