Planning to avoid estate taxes

On Behalf of | Jan 17, 2017 | estate tax, Firm News

North Carolina residents who have estates worth more than the federal exemption may have estate taxes assessed at a rate of 40 percent after they die. There are several strategies that people can use to make certain that their money goes to the people and causes that they want to support rather than simply to the government.

The first step is for people to figure out whether or not their estates will be subject to estate tax. In order to determine the value of an estate, the government adds together the value of the real estate holdings, business valuations, life insurance, investments, bank accounts and property of the estate. Because of the value of land, farmers often run into this problem.

People may reduce the size of their estates by giving away money while they are still alive. Each person is allowed to give away up to $14,000 to as many people as he or she wants to every year. They may also give money to charitable organizations, and the donations may also be tax-deductible. Some types of trusts are good vehicles for shielding assets from estate taxes. People who will not be able to completely avoid estate taxes might want to purchase life insurance policies in order to cover the estate tax bill. Irrevocable life insurance trusts should first be set up to purchase the policies so that their values are not added to the estates.

People who need help with determining whether or not their estates may be subject to estate tax might want to meet with an attorney. There may be a variety of techniques available to get below the exemption limit, which in 2017 is $5.49 million per person.