Star Trek Icon’s Ashes Will Be Spread In SpaceSeptember 19, 2022
Trouble Brews For Newman’s Own FoundationSeptember 19, 2022
The IRS has made some changes that are going to make it easier for wealthy people to avoid estate taxes. In the past, when one spouse died, the other spouse would have a two-year period of “portability.” This was used by couples with high net worth, to address some of the tax burden they encounter after the death of their spouse. In short, the surviving spouse would inherit from the deceased spouse tax-free, but then would owe estate taxes when they passed away, reducing what they left behind.
Recently, however, the IRS has made things easier for couples by changing the portability period to five years instead of two. As of 2022, the exemption from estate taxes is $12.06 million. In other words, that amount or less can be left to non-spouse beneficiaries such as children, either during the person’s life or at the time of their death. That amount of money is tax-free when it comes to estate tax rules.
Anything above the $12.06 million threshold is subject to estate tax of 40%. The changes the IRS made will allow for a five-year portability option, along with the ability to elect that on the tax return instead of contacting the IRS for additional guidance. Estate tax returns can cost between $5,000 and $20,000 for someone with high net worth.
That amount, though, is much lower than the 40% on every $1 million of the exemption, which can save a significant amount in estate taxes for wealthy individuals. By using portability, the surviving spouse can choose to use their exemption and the exemption of their deceased spouse, making the total exemption for estate taxes, $24.12 million.
The exemption is set to drop after 2025 due to changes in legislation, so having the additional exemption portability option is going to make a big difference in the amount of taxes owed by those who have high net wealth. That can protect families and children from losing a big portion of their assets.
From estate planning to trust administration, we help you from start to finish. We work with families at all stages of their lives to help protect their futures. Our services are customized to your specific goals and will alleviate your unique concerns. Contact us today to learn more!