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When it comes to estate planning, there\u2019s no shortage of techniques and strategies available to reduce your taxable estate and ensure your wishes are carried out after your death. Indeed, the two specific strategies discussed below should be used in many estate plans.<\/p>\n
1. Take advantage of the annual gift tax exclusion<\/strong><\/p>\n Don\u2019t underestimate the tax-saving power of making annual exclusion gifts. For 2023, the exclusion increased by $1,000 to $17,000 per recipient ($34,000 if you split gifts with your spouse).<\/p>\n For example, let\u2019s say Jim and Joan combine their $17,000 annual exclusions for 2023 so that their three children and their children\u2019s spouses, along with their six grandchildren, each receive $34,000. The result is that $408,000 is removed tax-free from the couple\u2019s estates this year ($34,000 x 12).<\/p>\n What if the same amounts were transferred to the recipients upon Jim\u2019s or Joan\u2019s death instead? Their estate would be taxed on the excess over the current federal gift and estate tax exemption ($12.92 million in 2023). If no gift and estate tax exemption or generation skipping transfer (GST) tax exemption was available, the tax hit would be at the current 40% rate. So making annual exclusion gifts could potentially save the family a significant amount in taxes.<\/p>\n 2. Use an ILIT to hold life insurance <\/strong><\/p>\n If you own an insurance policy on your life, be aware that a substantial portion of the proceeds could be lost to estate tax if your estate is over a certain size. The exact amount will depend on the gift and estate tax exemption amount available at your death as well as the applicable estate tax rate.<\/p>\n However, if you don\u2019t own the policy, the proceeds won\u2019t be included in your taxable estate. An effective strategy for keeping life insurance out of your estate is to set up an irrevocable life insurance trust (ILIT).<\/p>\n An ILIT owns one or more policies on your life, and it manages and distributes policy proceeds according to your wishes. You aren\u2019t allowed to retain any powers over the policy, such as the right to change the beneficiary. The trust can be designed so that it can make a loan to your estate for liquidity needs, such as paying estate tax.<\/p>\n The right strategies for you?<\/strong><\/p>\n Bear in mind that these two popular strategies might not be right for your specific estate plan. We can provide you additional details on each and help you determine if they\u2019re right for you.<\/p>\n \u00a9 2023<\/em><\/p>\n <\/body> When it comes to estate planning, there\u2019s no shortage of techniques and strategies available to reduce your taxable estate and ensure your wishes are carried out after your death. Indeed, the two specific strategies discussed below should be used in many estate plans. 1. Take advantage of the annual gift tax exclusion Don\u2019t underestimate the […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,9,10],"tags":[8,11,12],"class_list":["post-16606","post","type-post","status-publish","format-standard","hentry","category-articles","category-estates","category-news","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16606","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=16606"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16606\/revisions"}],"predecessor-version":[{"id":16607,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16606\/revisions\/16607"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=16606"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=16606"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=16606"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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