If you want to minimize the complications for your survivors, or if you are in the midst of probate right now, an experienced probate lawyer can answer your questions and put your mind at ease.

When someone passes away, they leave behind a taxable estate. Under current law, your taxable estate for federal estate and gift tax purposes can be significantly larger than your probate estate. Unfortunately, your taxable estate includes everything, such as:

  • All your property interests. Includes any property interests you own and property interests in a trust controlled by you outright or by a Trust to which you have significant “strings attached.”
  • All your qualified retirement plan proceeds. Qualified retirement plan proceeds are included unless you retired no later than 1984. Persons retiring no later than 1984 may qualify for a full or partial exclusion of these proceeds.
  • All life insurance proceeds. Proceeds from life insurance policies owned by you at the time of your death or payable to your estate are part of your taxable estate.

The federal estate tax generally applies when a person’s assets exceed $11.4 million in 2019 and $11.58 million in 2020 at the time of death. The estate tax rate can be up to 40%. Some states also assess estate tax. Property left to a surviving spouse generally isn’t subject to the estate tax.

In addition to federal estate and gift taxes, there are also state inheritance or estate taxes. For 2019, 13 states, including Maryland, and the District of Columbia have an estate tax. Many have lower asset thresholds than the federal government. If you live ina state with an estate tax, the good news is that (generally speaking) your estate tax bill is subtracted from the value of your taxable estate before you calculate what you might owe the IRS.

Gift taxes: In 2020, the lifetime exclusion rises to $11.58 million.In 2019 and 2020, you can give up to $15,000 to someone in a year.If you give more than $15,000 in cash or assets in a year to anyone, you need to file a gift tax return. That doesn’t mean you have to pay a gift tax; It just means you need to disclose the gift. The annual exclusion per recipient; it isn’t the sum total of all your gifts. That means, for example, that you can give $15,000 to your cousin, another $15,000 to a friend, another $15,000 to the neighbor, and so on all in the same year without having to file a gift tax return.The annual exclusion also per person, which means that if you’re married, you and your spouse could give away a combined $30,000 a year to whomever without having to file a gift tax return.

Clearly, the tax issues surrounding your estate can be quite complex. An experienced estate planning attorney will help you address these tax issues and minimize the impact of taxes on your beneficiaries through the use of a carefully drafted combination of Wills, Trusts and other insurance and gifting Instruments.

Guiding an estate through the probate process and effectively administering that estate requires a keen understanding of probate and tax laws. If you need help in administering an estate, contact an attorney experienced in probate and estate administration to ensure the most effective administration of the estate.