As you immerse yourself in the estate planning process in Michigan, you quickly discover that a major element of this task is limiting the potential liabilities your estate may face. Settling your debts and structuring your estate so as to minimize (or even avoid) the impact of probate go a long way towards accomplishing this goal.
Yet many come to our team members here at Robert D. Paulbeck Attorney at Law believing that there is one estate-related expense you cannot avoid: taxes. Yet an estate tax strategy should indeed be part of your plan, as it can help to limit your liability.
Understanding the federal estate tax exemption
According to the Internal Revenue Service, a federal estate tax exemption exists that the government updates every year. For 2020, that amount is $11.58 million. Thus, if the total taxable value of your estate does not exceed that amount, it will not be subject to tax.
Taking advantage of estate tax portability
Estate tax portability allows you to share your exemption with your spouse. If you plan on leaving your entire estate to your spouse, that amount passes on tax-free (thanks to the unlimited marital deduction). This preserves your entire exemption amount, which your spouse can then claim to effectively double their exemption amount to $23.16 million. This does not happen automatically, however. Your ex-spouse must file an estate tax return electing portability within nine months of your death in order to take advantage of it.
Michigan does not impose a local estate tax, nor does it make your beneficiaries pay an inheritance tax. You can learn more about all of the elements of the estate planning process by continuing to explore our site.