You’ve probably heard of the “Death Tax.” In short, it means that the government is going to reach into your pockets (if you’ve got a high enough net worth), in a very big way, once you pass away. This, despite the fact that you’ve worked extremely hard to build your wealth… and you’ve already paid taxes on it, every step of the way!

While this is infuriating, it is a reality right now, so it’s important to plan and prepare in order to minimize the amount of hard-earned wealth that you’ll have to fork over to the government. In this blog entry we provide an overview.

Assets Subject to the Death Tax

The first thing you need to know is which assets in your estate are subject to this tax.  The following are the key categories that will be taxed:

  • Personal Property – This includes things like your home, vehicles, furniture, artwork, and other similar items.
  • Business Assets – This could be property, machinery, inventory and cash reserves for your business.
  • Investments – Any investments that you own including real estate, stocks and bonds.

The federal estate tax is $ 5,430,000 in 2015. Currently, there is no Louisiana inheritance tax. The top federal estate tax rate is 40%.

How to Avoid the Death Tax

Unfortunately, this tax is almost impossible to completely avoid if you have a large estate.  But there are several options that can help. Be sure to speak to a qualified estate planning attorney before taking action:

  • Gift the Money Now – You are permitted to give individuals up to $14,000 per year while you are living without being taxed.  Consider offering these gifts to your future heirs now so they can avoid the death tax.
  • Leave Assets in Trust – Certain types of trusts can be set up in such a way that the death taxes for the assets in them can be avoided or reduced.  Talking to an experienced estate planner can help you determine if this is the right process for you.
  • Transfer Assets into Limited Partnerships – If you transfer the ownership of certain assets into a limited partnership business it is possible to avoid the death tax.
  • Leaving Assets to Surviving Spouse – If your spouse directly inherits your assets, they may not be responsible for the death tax.  This can help to avoid the taxes, at least until your spouse passes away as well.

If you need help planning for the death tax, give us a call today.  We can help you create a plan which ensures that the government will get as little as legally possible when you pass.