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Reducing estate taxes

On Behalf of | Apr 6, 2016 | Estate Taxes

The current federal estate tax exemption is $5.45 million per person, and after that, any additional part of a person’s estate may be taxed. While that may seem like an enormous amount of money, many states also have estate taxes that have much lower taxation thresholds, although Georgia no longer has one. Therefore, if people want to leave the most of their assets possible to their heirs, there are some ways they may want to reduce the value of their estate.

One way that they can reduce their total estate is by giving away the money before they pass on, but this needs to be done carefully, so people don’t run out of funds before the end of their life. People may gift up to $14,000 per recipient per year without being taxed, and gifts that are paid directly to medical providers and schools for tuition are free of taxes and spending caps.

People may also want to consider moving to a different state if the one they live in has a very low threshold for estate taxes or a very high tax. There are a number of states that have no estate or inheritance tax, and the savings could be worth the cost of relocation.

While much of estate planning deals with how to handle and distribute assets upon someone’s death, there are also a variety of documents that help people run their lives. Powers of attorney in particular allow a trusted individual to make choices for someone who is not able to due to becoming incapacitated. An estate planning attorney can often suggest other documents as well.