Estate Planning: Why Estate Taxes Don’t Matter Much Anymore
It sounds like a shock claim — estate taxes don’t matter in estate planning anymore. We promise, though: this isn’t just about drawing you into our article. The headline really is true… and The National Law Review is backing us up on it.
Don’t misunderstand — taxes aren’t completely irrelevant to estate planning. In fact, if you’re very wealthy, you’ll still need to spend a lot of time talking about tax when planning your estate. After all, the estate tax still hovers around 40%.
These days, though, the overwhelming majority of American families are exempt from the federal estate tax. Most states (including Ohio, as of 2013) have done away with their versions of the estate tax too.
So unless your estate is worth more than $5.45 million (or $10.9 million for a married couple), the estate tax simply isn’t a big blip on your radar anymore. That’s a relief. But it doesn’t mean you don’t still have an estate to plan for — you do. It just means you’re free to focus on more important considerations.
For instance: capital gain taxes on the assets you’ll eventually pass to your beneficiaries. That’s different from the estate tax, but it’s still something you want to avoid to the greatest extent possible. With the right strategies in place, you can substantially reduce your estate’s tax liability, allowing more of your money to pass to the people you love.
A smart estate plan will also help you ensure that the transfer goes smoothly, ironing out every wrinkle and avoiding domestic rivalries after you’re gone.
Modern estate planning can still be plenty confusing, but we think it’s helpful for people to know that one of the biggest stressors in the whole process — the estate tax — simply isn’t relevant for the majority of Americans anymore. Cheers!