Americans have never been fond of taxation, but there are few taxes that have been more despised than the estate tax. For many Americans, the idea that the government is somehow entitled to a portion of their wealth when they die is something that they just can’t stomach. And though Congress has taken steps to make sure that the tax affects only a small subsection of the wealthiest estates each year, there are still many who believe that even those limitations don’t go far enough. Support for repealing the federal estate tax remains high.
Until recently, the Georgia estate tax was a concern as well. Georgians often went to great lengths to use various tools and strategies that could minimize their estates’ tax liability. Granted, the old Georgia tax on estates did not represent an added cost above that imposed by the federal estate tax – since Georgia used the so-called “pick up tax” until 2005, whereby the state could claim a portion of any federal estate tax that might have been due. That pick-up tax option was removed when Congress passed the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), and Georgia joined most other states when it decided not to create its own estate tax.
Nothing to Worry About…
On the surface, the lack of a state estate tax might seem as though Georgia’s residents have no reason to worry about taxes on their estates. For those who operate under that assumption, it might be easy to believe that they now have one less reason to worry about estate planning – at least where tax mitigation is concerned. Unfortunately, though, that is simply not the case. For while there is no estate tax in Georgia today, there is no guarantee that a future Governor and legislature won’t impose one at some later date. And even if that never happens, residents still need to contend with the federal estate tax.
When Does the Estate Tax Apply?
Estate tax proponents routinely point to the targeted nature of the tax, and the fact that it affects a tiny fraction of decedent estates each year. That argument is tailor-made for Americans whose main concern about any taxation is that it doesn’t impact their lives. However, the argument is at least somewhat disingenuous, since it is designed to suggest that only the rich ever find themselves coping with estate tax consequences. That’s simply not true.
If you own a business – even a family-operated small business – there is an opportunity for your estate to be valuable enough when you die that estate taxes could be levied. If you have farmland or other valuable property, the total value of that land could place your estate at risk for estate tax liability. Life insurance policies, art collections, and other valuable assets can all add up and make your estate valuable enough to trigger those estate taxes.
That’s because the federal estate tax exclusion is set at $5.49 million. While that sounds like a great deal of money, it’s easy to see how even many people who would never consider themselves “rich” could own enough assets to qualify for the tax. A small business owner with some real estate, business assets, and a solid life insurance policy could have enough non-case assets in his estate to trigger the tax, even though he never would have been considered “rich” while he was alive.
Are You Concerned about Estate Taxes?
If you have any real wealth at all, then you should be at least somewhat concerned about estate tax liability. After all, you don’t have to have millions of dollars in the bank to end up with an estate that is large enough to meet the threshold for this tax assessment. In addition, we always need to be cognizant of the fact that tax laws change with distressing regularity. It wasn’t that long ago that estates worth a mere million dollars were subject to the estate tax. While estate tax trends are moving in a positive direction now, that doesn’t mean that they will always do so.
Of course, there is no way to predict what any future tax laws may look like, but that doesn’t mean that there is no way to protect your estate from those future laws. You can guard against potential estate tax issues that may arise in the future by using sound estate planning today to protect and shield your assets. There are many techniques that can accomplish this goal, including:
- The use of irrevocable trusts to secure assets in a way that removes them from your estate. These trusts can provide asset protection that safeguards wealth to protect them from taxes, litigants, and other creditors seeking access to your estate.
- Gifting can also be used to reduce the size of your estate. You can make gifts of as much as $14,000 to any individual in each year, and use that gifting strategy with as many recipients as you’d like. Your spouse is also entitled to make the same type of gifts, which can double the amount of wealth you give away each year.
- You can also use spousal portability to enable a surviving spouse to avoid estate tax liability by using both spouses’ individual estate tax exclusion when one of them dies. That can enable that surviving spouse to keep $10.98 million without an estate tax assessment.
It’s important to understand that estate tax matters can be extremely complicated, and it’s difficult for most individuals to create a plan to deal with them on their own. To properly protect your wealth from taxation, you should consult with a professional estate planning attorney. The legal team at the Fouts Law Group, LLC, has the experience needed to address all your estate tax concerns and ensure that your wealth has the protection your family needs. We’ll work with you to develop a plan that will shield your assets from estate taxes and other dangers, and help you to keep as much of your wealth in your family as possible. To learn more about how we can help you deal with your Georgia estate tax concerns, contact us online or give us a call at (404) 596-7520 today.