When it comes to executing an estate, the tax implications for that estate are going to be important. Now, most estates don't run into the problem of qualifying for the federal estate tax, which sits at $5.43 million for 2015. However, some do, and even if you don't qualify for the federal estate tax, there will be some tax issues that your estate will have to deal with.
So how can you reduce the amount of taxes that will affect your estate? Let's look at a few simple steps that the testator can take to minimize the impact of those taxes:
- If you are married and your husband or wife is a citizen of the United States, then you can transfer assets or gifts to your spouse without fear of those assets or gifts being subject to a tax.
- Every year, an individual can gift up to $12,000 to another individual without fear of that money being taxed. This is usually a great strategy for people gifting money to grandchildren or young relatives. Over time, those annual gifts can really add up, and thus reduce the amount of taxable items attached to your estate.
- Trusts are always a great way to go as well. You can move parts of your estate to certain individuals, with stipulations on how the funds are utilized and how the beneficiary qualifies for them, to minimize the amount of assets that are taxed in your estate.
- In addition, you can make charitable donations that will also reduce the size of your estate and, likely, reduce the amount of taxes your estate faces.
Source: FindLaw, "10 Ways to Reduce Estate Taxes," Accessed Oct. 23, 2015