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Understanding your estate tax obligations

On Behalf of | Apr 23, 2024 | Estate Planning |

The government levies estate taxes on the total value of your estate, including property, cash, investments and valuable possessions.

You should understand the basics so you do not burden your heirs with unexpected financial obligations and protect assets after you pass away.

Determining your taxable estate

Only 33% of senior citizens have any form of estate plan, which means that they have not prepared their estates and heirs for estate taxes. To calculate your estate tax, you need to first determine the total value of your estate. This includes all assets owned at the time of death, minus any debts or liabilities. Common deductions may include mortgages, loans and funeral expenses.

Exemption thresholds

As you create your estate plan, you should know that not everyone has to pay estate taxes. In 2024, the federal estate tax exemption is $12.06 million per person. This means if your estate’s total value falls below this threshold, you do not have to pay federal estate taxes.

State estate taxes

Washington State levies taxes on estates valued at over $2.193 million as of 2024. The tax rate starts at 10% and can go up to 20% for estates valued over $9.344 million. Assets passed to a surviving spouse or qualified charities are exempt from the estate tax.

Gift tax

Gifts made during your lifetime can also impact estate taxes. There is an annual gift tax exclusion, so you can gift a certain amount to individuals each year without triggering the gift tax.

Proper estate planning can help minimize estate taxes and ensure your assets get distributed according to your wishes. This may include setting up trusts, making strategic gifts and utilizing tax-saving strategies.

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