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How can you reduce estate taxes?

Aug 30, 2021 | Estate Planning

The estate tax is a duty the government levies against the net value of your possessions and interests at the time of your death.

If you have beneficiaries, they will receive the portion of your estate that remains after the collection of death taxes.

Estate taxes in Florida

The state of Florida abolished its estate tax in 2004, which means you will not pay the tax regardless of the size of your assets. However, you still may be subject to federal estate tax laws.

Reducing estate taxes

Federal estate taxes in 2021 apply to assets worth more than $11.7 million. If your net worth makes you eligible to pay death taxes, you can take the following steps to mitigate your tax burden:

  1. Leave everything to your spouse: If your spouse is a U.S. citizen, you can bequeath an unlimited amount of money without incurring an estate tax.
  2. Give it all away: Gifting the money to your beneficiaries while you are still alive removes those assets from your estate, easing your tax burden. Additionally, charitable contributions upon death are exempt from federal estate taxes.
  3. Create a trust for your life insurance: Depending on the terms of your policy, it may become part of your estate, which greatly increases your net worth at the time of your passing. With estate planning, you can establish this death benefit separately from your taxable assets.

If you have concerns about what will happen to your assets after your passing, then you should understand your financial situation and create a plan to protect your estate for the benefit of your heirs.