Past posts on this blog highlighted the need to have a well-developed plan to settle your liabilities before or upon your death. Doing so ensures that your personal wealth remains available to pass on to your beneficiaries. Yet many of the prospective clients that come to see us here at Parr Price Law, PS believe that there is one potential expense they cannot avoid: taxes.
If you share the same belief, then it will likely come as welcome news to know that you can indeed plan to limit (and even avoid) a potential estate tax liability.
Planning for federal estate taxes
The federal government does levy an estate tax, but only against those estates that qualify for it. There is a federal estate tax exemption that (should the total taxable value of your estate come in under that amount) may help you avoid a tax liability. Information shared by the Internal Revenue Service shows that the exclusion amount for 2020 is $11.58 million (increasing to $11.7 million in 2021).
Estate tax portability allows you to share your federal estate benefits with your spouse. By filing an estate tax return within nine months of your death electing portability, they may be able to protect as much as $23.16 million from taxes.
Reviewing Washington’s estate tax regulations
The state of Washington does impose an estate tax on its residents. Per The Washington State Department of Revenue, the state’s estate tax exemption for 2020 is $2.193 million. Washington does not allow for estate tax portability, yet it also does not levy an inheritance tax (meaning your beneficiaries do not have to pay taxes on whatever they receive from your estate).
You can find more information on estate planning basics throughout our site.