People in Clarksville work throughout their entire lives to accrue assets to pass on to their heirs. Yet probate, creditors claims and many of the other liabilities associated with estate administration can often eat into the funds that they have preserved. Proper planning can help to mitigate some of those costs, yet that does not stop people from worrying about them.
One such liability that many may have already accepted the inevitability of is taxes. Yet even they can be avoided if one understands the guidelines governing them
Which estates are taxed?
Most might assume that all estates are taxed, yet that is not the case. Tennessee repealed its state estate tax in 2016, leaving people to only have to focus on federal estate taxes. The federal government has set an estate tax exemption, which allows estate whose total taxable value comes in under a certain threshold to avoid taxes altogether. Per Forbes Magazine, the threshold amount for 2020 is $11.58 million.
Estate tax portability
Yet with the right estate planning strategy, one might even be able to protect even more than that for their heirs (indeed, as much as twice as more). This is because the government also allows an unlimited marital deduction, giving married couples the chance to transfer financial gifts to each without them being taxed. Thus, if one chooses to leave the entirety of their estate to their spouse, it will not be taxed.
This happens while still preserving their estate tax exemption amount. According to the Internal Revenue Service, the surviving spouse can then file an estate tax return for the same fiscal year the decedent dies electing estate tax portability. This allows them to combine their deceased spouse’s unused exemption amount with their own, thus preserving up to $23.16 million for their heirs.