Taxes: they suck the blood and life from the economy, but there’s a certain level of self-sufficiency that comes with learning how to avoid them. This article is about avoiding inheritance tax through giving away your assets before you die. Doesn’t sound very glamorous, does it?
When is Inheritance Tax Due?
The federal inheritance tax is due when an individual’s estate exceeds $5.49 million, per person. However, certain deductions can reduce the tax payable. For instance, if the deceased person left a will, the value of their assets may be reduced by the amount included in the will. If there is no will, then the entire estate is subject to tax.
Given that inheritance taxes are due only when an estate exceeds a certain threshold, it’s important to make sure that you don’t leave any assets to your heirs above this limit. One way to do this is to give away all of your assets before you die, so that you don’t have to worry about Inheritance Tax when you PASS away. This not only reduces the stress of dealing with taxes upon death, but also frees up money that can be used for your loved ones instead.
How to Give Your Assets Away
If you are considering giving away your assets before you die, there are a few things to keep in mind. First, it is important to understand how inheritance tax works. Inheritance tax is a tax levied on the inheritance of a deceased person. This tax is assessed as an addition to the value of the estate, which means that it can raise the overall cost of an estate-planning strategy. Second, consider your options for transferring assets without incurring inheritance tax. A gift during your lifetime may be preferable if you want to avoid probate fees and state estate taxes. Finally, make sure you have a will in place if you want to ensure that your assets go to the people you want them to go to.
Can You Avoid Inheritance Tax by Giving Your Assets to Charity?
Now that you’re thinking about your own death and potential estate taxes, it might be a good time to start thinking about ways to avoid them. One popular way to reduce or avoid inheritance tax is to give away most of your assets to charity before you die.
Here are some tips on how you can do this:
- Secure your irrevocable written power of attorney from a close family member or friend who can make financial decisions on your behalf if you cannot. This will allow them to give away your assets without needing your approval, which may help speed up the process.
- Make lists of all of your assets and their approximate values. Include real estate holdings, securities, savings accounts, cars and other vehicles, and personal possessions such as furniture and jewelry. Note the fair market value of each item and whether it’s taxable as income when gifted.
- Discuss your estate plan with a financial advisor who can help you make the best choices for minimizing taxable estate values while ensuring that necessary bills and debts are paid. It may also be helpful to consult with an experienced lawyer regarding specific issues related to estate planning, such as probate registration fees or creditor rights after death.
What Happens If You Don’t Give Away Your Assets Before You Die?
Inheritance taxes can be a huge burden for those who are not biologically related to the deceased. It is not always easy or possible to avoid inheritance taxes, but there are a few things that can be done. One effective way to avoid inheritance taxes is to give away all of your assets before you die. This will automatically avoid any inheritance taxes that may be due, and it will also allow you to provide financial security for your loved ones after you die.
Overview of How Giving Your Assets Away Works
You may be able to avoid estate and inheritance tax by giving away your assets before you die. Here’s how it works:
If you give away your assets before you die, the money will not go through your estate and will not be taxed. The exception to this is if you give the asset to someone who qualifies as a “dependent” of yours. In that case, the gift will be considered a taxable event, but the dependent will not have to pay any tax on the gift.
There are a few things to keep in mind when considering giving away your assets. First, make sure you know the value of your assets so you can give them away evenly. Second, make sure the person you give the asset to qualifies as a dependent. Third, make sure you get documentation confirming the gift. Fourth, make sure you understand how inheritance tax works and make any necessary updates to your Will or Estate Plan. Fifth, notify the IRS if you make a gift of assets worth more than $13,000 during your lifetime (or $5 million after December 31, 2017). Sixth, keep track of all gifts made over $600 so you can file an annual gift tax form (Form 709) later on.
