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Effective Estate Tax Planning Strategies in Georgia
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Estate tax is a compulsory charge on people’s right to transfer their assets to others when they die. When this tax is payable, it must be deducted from a deceased person’s estate before the assets are distributed to the deceased’s beneficiaries and heirs.
However, estate tax rates in the U.S. are high and could go as high as 40% of the deceased’s estate, depending on the circumstances. When that happens, a massive chunk of the properties the deceased left for their loved ones to enjoy would be used to settle the tax at the assessed rate, leaving the beneficiaries with a fraction of their original entitlement.
The good news is that there are ways to minimize or avoid payment of this tax. However, that can only be achieved with proper planning by the owner of the estate while they are still alive.
If you own assets in Georgia and you’d like to minimize the estate tax liability that could apply to your estate and preserve your wealth for your heirs, it is important that you understand how estate taxes work in the state and the strategies that could help you achieve your goals.
The Law Office of Paul Black can provide personalized estate tax planning guidance suitable for your unique situation. Below, we discuss Georgia’s estate tax laws and common estate tax planning strategies to help you anticipate and prepare for possible estate tax liabilities on behalf of your loved ones.
Top 3 Estate Tax Planning Strategies in Georgia
Setting Up a Trust
A trust is a legal arrangement that allows a person who owns assets to transfer their property to a third party (the trustee) for the use and benefit of those named by the creator/property owner.
Setting up a trust is one of the most effective strategies for passing wealth to heirs without stress. Because the trust property has been transferred to the trustee or the trust in some cases, it is no longer counted as part of the owner’s estate for estate tax purposes, making it a practical estate tax planning tool for people.
If you’re also considering incorporating charitable contributions into your estate planning, creating a trust can help you achieve a seamless donation or transfer of assets to the charity of your choice during your lifetime and after you pass.
There are different types of trusts in Georgia, including:
Revocable living trusts
Charitable remainder trusts
Special needs trusts
Asset protection trusts.
Each type of trust has different purposes and offers different levels of protection for estate taxes and other purposes. Before you create a trust, it is important that you consult an estate planning attorney to help you understand the estate planning and tax implications of different types of trusts so you can determine which is most appropriate for you.
You can reduce the value of your taxable estate by giving out money or assets to your loved ones instead of living it to them in a will. Doing this over a long period can help to bring the value of your remaining estate below the federal estate tax exemption threshold while ensuring that your loved ones are not left destitute during your lifetime and while waiting to receive the bulk of your estate when you pass on.
However, you must be cautious with this strategy because there is a gift tax imposed by the federal government that you may be liable for. This gift tax is payable if the value of the gift given to a specific person exceeds a certain amount each year ($18000 for individuals and twice that if the giver is a married couple in 2024).
Investing in Life Insurance
Investing in a life insurance policy is a good way to ensure your beneficiaries receive a huge payout after your death without estate tax liability.
However, you’ll need to name a specific person or people as your beneficiary for this to work. Otherwise, the funds would be counted as part of your estate, which could make it subject to estate tax.