Whether you have already set up an estate plan or you find yourself in the early stages of the estate planning process, it is pivotal to take a look at estate taxes if you have significant assets. In fact, federal estate taxes could apply, depending on the value of your estate, and filing an estate tax return could become necessary.
It is pivotal to understand whether estate taxes will kick in and discuss this issue with the person who will manage your estate after your death. Moreover, some people take advantage of strategies that help them reduce estate taxes.
The value of your gross estate and taxes
According to the Internal Revenue Service, estates that have taxable gifts and gross assets over $12,060,000 must file an estate tax return if the decedent died in 2022. For decedents who died in 2021, an estate tax return is necessary if gross assets and taxable gifts surpassed $11,700,000. Various assets count toward the value of a gross estate, such as real estate, cash, securities, business interests, annuities and insurance.
Deductions and estate taxes
The IRS also goes over some of the deductions that can impact estate tax liability. For example, property that goes to a qualified charity or spouse, expenses related to estate administration and debt such as a mortgage could count as allowable deductions. It is pivotal to carefully review potential deductions and estate tax liability.
If your estate includes significant assets, you should keep in mind that every estate is unique and go over any factors that could influence whether taxes apply as well as potential tax obligations.