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Whenever a person dies, their estate enters probate court. This is a court that legally divides the property or ensures the will is accurate and enforceable. It is then that the inheritance tax occurs. This is a tax, often called a death tax, which is levied on the value of the estate if it is not otherwise protected.
It is possible to reduce the amount of this tax if you take the time to plan in advance to do so. You may not be able to avoid it, but what you can do is reduce the amount of estate that can go through the process.
How to Reduce Inheritance Taxes
If you follow these steps to help reduce your inheritance tax, it is also a good idea to work with a financial planner to ensure that the methods and steps you take are legally enforceable.
* First, determine the total value of your estate. Your estate includes the fair market value of all of your assets, including real estate, securities, cash, real estate and other property you own value in.
* Property that is left for your surviving spouse or money that you leave to charities does not count towards the value of your estate. More so, the value of your estate will first pay off any debts you have.
* Estate tax may be something you have to pay, which is often paid only for those who have assets higher than $1 million, but this figure can change from year to year. Any amount over the limit listed is heavily taxed, making it very important to reduce the value of the estate that falls into this category.
* If you have a surviving spouse, your estate will not be affected by the inheritance tax as long as your spouse is a citizen of the United States.
* Plan where you want your money to go. You can designate the value of your property to go anywhere you prefer. For example, you can give money to your heirs up to $13,000 per year without facing taxes. You can also pay for that person's expenses, such as paying for higher education or medical costs.
* Create an estate plan that organizes the value of your estate to make it less likely to be affected by the inheritance tax. This plan will go into effect at the time of your death and will help to reduce your taxes at that time. You can include trusts, insurance plans and other types of financial planning tools to reduce the effect of any type of tax.
The Value of Planning Effectively
Because inheritance tax can be very high, it is best to put thought and planning into creating an effective estate plan that will reduce the taxes your estate has to pay. Keep in mind that a will is not good enough to avoid the inheritance tax and in most cases, individuals will need to work with a financial planner and an accountant to plan for where money will go to avoid these taxes.
We look at your life through tax - and find ways to help. H&R Block is a global consumer tax services provider that prepares one in every seven U.S. tax returns. H&R Block is global leader in tax preparation services - we've prepared more than 700 million tax returns through retail locations and at-home, digital solutions since 1955. And with approximately 12,000 tax offices in all 50 states, as well as U.S. territories, military bases and abroad, we're always available to help you file your taxes. Find your local Ashburn tax office and schedule an appointment today.
We look at your life through tax - and find ways to help. H&R Block is a global consumer tax services provider that prepares one in every seven U.S. tax returns. H&R Block is global leader in tax preparation services - we've prepared more than 700 million tax returns through retail locations and at-home, digital solutions since 1955. And with approximately 12,000 tax offices in all 50 states, as well as U.S. territories, military bases and abroad, we're always available to help you file your taxes. Find your local Broadlands tax office and schedule an appointment today.
The material in this article is for informational purposes only. The views expressed in this article are those of the author and do not necessarily reflect the views or opinions of Local.com. See Additional Information