On behalf of Chandler and Brown, Ltd. posted in estate tax on Friday, July 20, 2018.
As the saying goes, two things that are certain in life are death and taxes. Sometimes, these two things intertwine. In 2018, if a U.S. citizen dies leaving an estate worth $11,180,000 or more, they may need to file an estate tax return. While this may not affect many people in Minnesota and elsewhere, those who are subjected to the federal estate tax likely do not want to see the size of their estate reduced, as it means there will be less left to their heirs. They may wonder if there are any deductions they may use to reduce the amount they will owe in federal estate taxes.
As it turns out, the Internal Revenue Service recognizes several deductions a person may use to reduce the amount they must pay in estate taxes. One of these deductions is the marital deduction. All assets of the gross estate that pass on “outright” to a surviving spouse may be deducted. In addition, there is the charitable deduction. If the decedent leaves assets to certain qualifying charities, they may deduct these contributions from their gross estate.
There are other deductions that may be available as well. Mortgages and debt may be deducted, as may costs of administering the decedent’s estate. Any losses incurred while administering the estate may also be deducted.
So, while the federal estate tax may not affect many, Minnesota has a state estate tax that may affect more. It is applied to any estate greater than $2 million. There are some strategies that can be used to reduce the amount one owes in estate taxes. For example, rather than executing a will, a person could set up an irrevocable trust. In any case, those who want to learn more about whether the estate tax will apply to them and what they can do to reduce the negative impact it may have on their estate will want to seek the help necessary to have their questions answered.