How Can I Minimize Estate Taxes?

You cannot escape your obligation to pay taxes, even upon your unfortunate passing. That is, there may be tax implications on your estate plan that you must be wary of. Read on to discover whether you can minimize the taxes imposed on your estate and how one of the seasoned Butler County irrevocable tax trust attorneys at Heritage Elder Law & Estate Planning, LLC can help you adopt a comprehensive plan.

What taxes may be possibly imposed on my estate?

For one, if you are a high-net-worth individual, federal taxes may be imposed on your estate. This is specifically if you have a net worth of more than $13.61 million as of 2024. Otherwise known as the death tax, the federal estate tax may range anywhere between 18 to 40 percent.

But specific to the Commonwealth of Pennsylvania, state taxes may be imposed on your estate depending on who you name as your beneficiaries. This is specifically if you designate anyone other than your spouse or a charity to be the inheritor of your estate (i.e., your child, grandchild, sister/brother, niece/nephew, friend, etc). Otherwise known as the inheritance tax, the state estate tax may range anywhere between 4.5 to 15 percent.

What can I do to minimize estate taxes?

A common solution to go around the federal or state estate tax is to establish an irrevocable tax trust. Essentially, the way to enforce this trust type is to, first, write down a set of rules for your loved ones. These instructions may disclose your wishes for who gets access to the trust’s assets upon your unfortunate passing (i.e., your designated beneficiaries), among other things. Then, you need to appoint a trusted individual to manage these set-aside assets indefinitely (i.e., your designated trustee). This appointment may also have them distribute the trust’s assets to your designated beneficiaries at the time and in the manner you instructed in its terms and conditions.

So, once you sign the bottom of your trust document, you may be never allowed to touch its assets or change its terms and conditions again. This is in stark contrast to the power you maintain with a revocable trust. However, your sacrifice of fully relinquishing your ownership rights over the trust’s assets is done for the sake of protecting your designated beneficiaries from harsh federal and state estate taxes in the future.

With all that being said, you must also understand that for this trust type to be effective, you must have your assets in it for long enough. In other words, you must have your assets in this trust for three years or 12 months if you wish to escape the federal or state estate tax, respectively.

In conclusion, what you need the most is likely strong legal representation from one of the competent Butler County estate planning & probate attorneys. Someone at Heritage Elder Law & Estate Planning, LLC is eagerly waiting for you to reach out.