How Can You Minimize Estate Taxes for Your Heirs?

Work with a lawyer to create an estate plan that includes a living trust to minimize estate taxes for your heirs.

Estate taxes are a necessary cost that must be planned for in the event of a person’s death. People often want to find ways to minimize the estate taxes their heirs will have to pay. While estate taxes can be a tricky subject, there are a number of legal methods that one can use to reduce the amount of money owed. In this blog post, we explore the many ways to minimize estate taxes for heirs in the state of Georgia.

Estate Taxes in Georgia

As of 2023, the federal estate tax exemption limit is $12.92 million, which means that estates worth more than that will be subject to federal estate tax. Currently (and fortunately), Georgia does not charge a separate state estate tax.

Ways to Reduce & Avoid Estate Taxes

  1. Gifts

One way to reduce the amount of estate taxes your heirs will have to pay is to make gifts during your lifetime. When you make a gift to someone, you are transferring money or property to that person without receiving anything in return. Gifts do not count as part of your estate for estate tax purposes. As of 2023, you can give away up to $17,000 per person per year without incurring any gift taxes. For example, if you have 5 grandchildren, you can give each of them $17,000 for a total of $85,000 without any estate tax liability. 

  1. Estate Taxes Exemption

The federal estate tax exemption limit is $12.92 million, so families with estates worth more than that should consider ways to reduce their estates below the exemption limit. There are a number of ways to do this. For example, one could make charitable donations, create a family limited partnership, or set up a trust. 

  1. Charitable Donations

Another way to reduce estate taxes is to make a charitable donation. Any donations made to a 501(c)(3) non-profit organization will be deducted from the estate’s taxable value, thus reducing the overall estate tax liability. This is a good strategy for those who want to make a charitable donation but don’t have the funds available to do so. 

  1. Family Limited Partnerships

A family limited partnership (FLP) is an excellent way to reduce estate taxes. With an FLP, the family transfers its assets into the partnership, and each member of the family owns a percentage of the partnership. The idea is that each member of the family will receive a share of the assets and any income generated from those assets, but only the members’ shares are taxed, not the total value of the assets. This can greatly reduce the overall estate tax liability. 

  1. Trusts

The final way to reduce estate taxes is to set up a trust. A trust is a legal vehicle used to hold and manage assets. It can be used to protect assets from estate taxes because, when assets are held in a trust, they are no longer part of the estate and are not subject to estate taxes.

Estate taxes can take a sizable portion of a person’s estate, leaving their heirs with a financial burden. Fortunately, there are a number of legal strategies that one can use to reduce or avoid estate taxes. These strategies include gifts, the federal and state estate tax exemptions, charitable donations, family limited partnerships, and trusts. By using one or more of these strategies, one can significantly reduce the amount of estate taxes their heirs will have to pay. 

If you are looking for ways to minimize estate taxes for your heirs, then it is important to consult with an experienced estate planning attorney. At Smith Barid, LLC, we specialize in estate planning and estate taxes, and we can help you find the most effective way to minimize or eliminate estate taxes for your heirs. Contact us today for a consultation. 

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