For most Americans, estate taxes aren’t something that you will have to worry about. In fact, roughly two out of every 1,000 estates face this estate tax. However, for those who are facing the estate tax, it is not a cheap venture and it is important to be prepared. In today’s blog post, Davidson Law Group looks at four things that you need to know about estate taxes and how they will impact your estate and your assets.
#1. Most Taxable Estates Pay Less Than 20% In Taxes
While the estate tax is a pretty good chunk of change if only because it is paid by the biggest estates in the country, the rates themselves aren’t that high. Most estates are taxed at roughly one-sixth of their value, coming out to around 17%. This is due to the fact that the estate tax is due only on the portion of the estate that climbs past the exemption level. In 2017, the exemption level was $5.49 million. So if your estate was worth $10 million, the estate tax wasn’t applicable to the full $10 million, just the $5.51 million that was over the line.
In comparison to other countries, the effective tax rate is also lower, and our estate lawyer can help you find the best rate.
Related Post: Taking Care of Taxes After Closing an Estate
#2. If You Have A Small Business, You Likely Won’t Owe
In 2017, less than 100 small business or small farms nationwide faced the estate tax. That’s just 1% of taxable estates and roughly 0.00003% of total estates in the United States. So, if you are a small business owner or own a farm estate, the odds of you having to pay estate taxes are pretty low. And even if you just so happen to be one of the roughly 80 estates that will owe estate taxes on your small business or far, it will likely be at less than a 6% rate. An estate lawyer can help you determine if you qualify as a small business.
Related Post: What Are Death Taxes?
#3. There Are Loopholes — But They Aren’t Easy
That magic word that all taxpayers love to hear: loophole. Yes, even with estate taxes, there are certain loopholes that can be utilized. However, they are most often only accessible to the wealthiest estates who can afford the best estate lawyers and accountants to find those loopholes. And while loopholes may sound good to you as a taxpayer not looking forward to having your estate subject to an estate tax, these aren’t increasingly organic loopholes.
There are many tax deferment strategies, and many of them are designed with you in mind. Most of us view tax deferment as tax evasion, but in reality, it is there intentionally to help you. These loopholes, however, are not. They are difficult to find and utilize.
#4. Your Heirs Won’t Pay The Tax
One thing that people subject to estate taxes stress about is the idea of their heirs paying that tax. However, this isn’t how estate taxes work. This is, however, why it’s important for you to utilize an estate lawyer to make sure your estate tax status is secure because your heirs may face a separate inheritance tax.