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Estate planning options to minimize tax liabilities

On Behalf of | Mar 6, 2020 | Estate Planning

Virginia residents who have amassed significant wealth often want to save their assets in order to pass them on to their loved ones and future generations to come. However, estate taxes may inhibit some people’s plans, and some options may help people minimize their tax burden. As part of the 2017 tax reform bill, a massive increase in the estate tax exemption went into effect. As of 2020, the exemption has reached $11.58 million per person and double for married couples.

While many people viewed the increased exemption with relief, some may be concerned that the increase is set to sunset in 2025 unless Congress renews it. At that point, it could return to the previous exemption rate of around $5 million for an individual and $10 million for a married couple, less than half of the current amount. While those amounts would be modified to keep up with inflation, it would still expose a much higher amount to estate taxes. Many people may want to take advantage of the larger exemption now in case it is not renewed in 2025. There are several strategies that they can pursue in order to do so.

One mechanism some people use is making lifetime gifts of up to $11.58 million, because that amount will be exempted from estate taxes. In other cases, people may want to give assets that they expect to appreciate, because the value of the gift in the future will be far greater but will not be subject to taxation.

There are a number of options that people may pursue to minimize estate taxes and maximize funds for their beneficiaries while locking in the increased exemption, such as irrevocable trusts. An estate planning attorney may offer advice on how people may protect their assets for the future.