Even though planning for your estate can be a scary prospect for most people, taking the time to prepare in advance can reduce the tax burden on your beneficiaries. This is particularly important if the value of your estate meets certain thresholds.
An estate tax is placed on the total value of your money and property which is paid before anything is distributed to the heirs. In contrast, an inheritance tax is paid by someone who inherits money or property. Michigan does not have an inheritance tax. At Grewal Law PLLC, we can provide you with a free no cost quote to help you with estate tax planning.
When making plans for your estate people often want to take the easy way out. Sometimes people will fill out a statutory will because of its simplicity, however these documents are not designed to reduce estate taxes.
Under Michigan law, these wills only require someone to simply fill in the blanks to the basic document template then have it witnessed by at least two people. These basic documents will not provide resources needed to reduce the tax burden on your heirs. A qualified estate planning attorney can help you make a will designed to help reduce the tax burden on your heirs for a large estate.
We can help you reduce your tax burden. Contact our Michigan estate planning attorneys at (888) 211-5798.
Estate Planning: State & Federal Taxes
Under Michigan law, a person’s assets and property used to be subject to an estate tax after he or she passed away. However, after 2004, there is no Michigan estate or death tax for a person’s heirs or estate.
There is still a federal tax in place, however your assets and property will only be subject to the federal estate tax if the value equals a specific amount. The limit changes each year, but for 2016 estates valued over $5.4 million will require your heirs to file an estate tax return and to pay estate taxes. What this means is any amount up to $5.4 million is tax free.
For anyone with a large estate, our attorneys can help you make plans for gift giving while you are still alive to help reduce your estate’s overall value. Other ways to avoid some federal taxes are through the setting up of a trust to protect your assets. We will help you weigh the pros and cons of each option to make the most optimum choice for your family.
How Can I Lower the Tax Burden for My Spouse?
It is important to examine how the taxes paid by your spouse could dramatically change after you pass away. Unless you have a large estate, the type of tax which could have the biggest ramification on your spouse is traditional income tax.
One consideration is looking at any retirement income you receive which is currently taxed. From certain pensions to traditional IRAs, as the person drawing these benefits you have to pay income taxes on the amount received. If your spouse will inherit an IRA and will continue to receive these benefits after your death, he or she will also be required to pay income taxes on the distributions.
Once he or she begins filing taxes as a single person again the income tax rate paid could increase because of this added income. Our team will help you determine if the creation of a trust may help reduce these overall taxes.
If you are younger and have not started drawing from certain retirement accounts, our estate planning team will help you look at other saving vehicles such as Roth IRAs. These accounts have the invested money taxed before it is deposited which can eliminate income tax when withdrawn from the account. Making changes to your accounts now could reduce the taxes paid by your spouse later.
Make Plans for Estate Taxes Now
Help protect the assets you have worked hard to acquire for your heirs. Work with an experienced Michigan estate planning lawyer to make arrangements that provide the best tax advantage.
From income tax changes to the federal estate tax, our team can you make plans depending on the size of your assets and how you want them dispersed to your heirs.
Contact us for a no obligation quote at (888) 211-5798.