Taxes are one of many factors that influence someone’s estate plan. Beneficiaries may trigger taxes when they sell inherited resources. Both the decedent and the estate could be responsible for income taxes. Very large estates could also be subject to federal estate taxes. Typically, the personal representative of a Georgia estate must pay all taxes and other financial obligations before distributing estate resources to beneficiaries or heirs.
There is another type of tax that can sometimes affect both the overall value of the estate and someone’s long-term plans. Gift taxes apply to resources given to one person by another, including their family members. What impact do gift taxes typically have on Georgia estate plans?
They affect strategic estate reductions
Large estates worth millions of dollars can be subject to very large estate taxes. The threshold for such taxes in 2024 is $13,610,000. The greater the difference between the estate’s value and that limit, the higher the tax rate that applies. The highest tax rate for estate taxes is 40%. That would drastically reduce how much beneficiaries inherit.
Those at risk of estate taxes can make structured gifts to their chosen beneficiaries. As of 2024, those trying to reduce the value of an estate through strategic gifts can give each beneficiary up to $18,000 worth of money and resources annually without triggering any gift taxes. Particularly if someone has a large family and maximizes the gifts they give others, they could significantly reduce the total value of their estate during their retirement years.
Gifts can still contribute to an estate’s value
While it may seem counterintuitive, some strategic gifts may still count toward the full value of the estate for the purpose of calculating estate taxes. Typically, any large gifts in the three years prior to someone’s death will add to the total value of the estate.
Therefore, people may need to plan to make gifts early in their retirement years rather than waiting for the last years of their lives if they expect to be very close to the threshold for federal estate taxes. Learning more about legal and financial matters that affect estate administration may benefit those creating or updating a Georgia estate plan.