Those establishing estate plans often want to leave a long-term and meaningful legacy that positively influences others. They might want to make contributions to charitable causes or provide assets and financial support for family members.
Before the beneficiaries of an estate receive what the testator allocated to them, other parties might lay claim to those assets first. Creditor claims usually have higher priority than beneficiary rights during probate proceedings. Tax obligations also require payment before the personal representative of an estate distributes assets to beneficiaries.
Taxes can substantially reduce how much property passes to someone’s selected beneficiaries. How much of an estate is at risk due to taxes?
Some taxes consume a lot of estate resources
There are multiple different taxes that may apply to an estate depending on its overall value and what happens with estate resources. If the personal representative of a Georgia estate sells the state property, the estate may be responsible for income taxes. The decedent may also have some income taxes due after their death.
Filing tax returns on behalf of the estate and the decedent could lead to thousands of dollars in tax obligations. Those taxes are unlikely to have a major impact on a sizable estate. However, larger estates might be at risk of estate taxes.
The good news for testators thinking about their estate plans is that Georgia does not impose either estate taxes or inheritance taxes. The bad news is that federal estate taxes could still diminish the value of the estate.
If someone has $13.61 million or more in their estate, federal estate taxes may be due before beneficiaries receive their inheritances. The tax rate that applies depends on how much the estate exceeds that limit. The lowest applicable tax rate is 18%, but some estates may have to pay as much as 40% in Federal taxes. Given how much of someone’s legacy could end up wasted on tax obligations, planning to minimize those taxes could be a smart move.
There are a variety of different tax strategies that people can employ when creating or updating an estate plan in Georgia. Addressing the potential impact of estate taxes proactively can help people provide the most substantial and meaningful legacy possible given their personal holdings.