Maximize Your Inheritance: Understanding Income Taxes in Estate Planning

– The current estate tax exemption amount is $12.06 million in 2022, so many people no longer need to be concerned with federal estate tax.
– Because of the large estate exemption amount, more planning can be devoted to saving income taxes for heirs.
– Options to consider include using the gift tax annual exclusion to transfer assets during life in order to save estate tax and making gifts to help a relative buy a home or start a business.
– If the gifted property grows in value, the recipient could face income tax in the form of capital gains tax on the sale of the property in the future. – Spouses used to use complicated strategies to equalize their estates for estate tax purposes.
– Portability allows a surviving spouse to apply the unused portion of the deceased spouse’s exclusion amount to their own transfers.
– Some estate exclusion or valuation discount strategies may no longer be worth pursuing, as it may be better to have the property included in the estate for a step-up in basis.

Your Estate Plan: Don’t Forget About Income Tax Planning