Estate and Gift Tax Attorneys in Conway, Arkansas Saving Money for Clients
Most of us hope that we can pass some of our hard-earned assets on to our children or other loved ones, either while we are alive or when we pass away. Unfortunately, this generosity can sometimes come with hefty tax burdens that reduce the value of the inheritance or gift. While estate tax laws vary from state to state, there are also federal estate taxes that sometimes apply. You have worked hard to earn money and other assets that you hope to pass on to your loved ones. You don’t want a portion of that hard work eaten up by taxes. The skilled estate planning lawyers at the Dudeck Law Firm have years of experience helping families maximize the value of gifts and inheritances, and we stand ready to help your family, too. Call us today at 501-327-3527 to discuss your options.
What Gift or Estate Taxes Apply in Arkansas?
Arkansas does not have a state-mandated estate/inheritance or gift tax. If an Arkansas resident inherits property that is located in a state that does have these taxes at the state level, you may owe tax in that state. Otherwise, there are no taxes of this kind at the state level in Arkansas. The one time an heir will have to pay any taxes at all on inheritance in Arkansas, assuming the assets inherited are in Arkansas, is if they inherit retirement accounts and withdraw assets from them. These funds will be subject to income tax, though other parts of the inheritance are not. At the state level, any size monetary gift can be given without a tax.
At the federal level, however, there are both estate taxes and gift taxes. The federal estate tax does not take effect unless the total value of the estate exceeds $12 million. This is the 2022 amount—the number may be adjusted periodically for inflation. If the estate is larger than $12 million, federal estate taxes will be charged to the estate, but nothing will be directly charged to the heir. If the estate is smaller than $12 million, there will be no taxes due. The federal gift tax does not take effect unless a gift is over $15,000 per year. Gifts over this amount must be reported to the Internal Revenue Service (IRS) and will be taxed. Gifts larger than $15,000 in one year will also count against your lifetime gift tax exemption of $11.8 million. It will also decrease your federal estate tax exemption.
If My Estate is Large Enough to Be Taxed, Are There Ways to Reduce the Tax Burden?
If you have a large estate that surpasses the $11.4 million benchmark, the key to reducing the estate tax burden is to reduce the size of the estate. There are several ways to do this. One way is to use monetary gifts to reduce the estate. You may give $15,000 per year to any number of people without a tax burden for you or for them. In this way, some of your estate can be transferred to your heirs early, freeing both them and you of tax consequences. For example, If you have 3 children and give each of them $15,000 per year for 5 years, you could possibly reduce the size of your estate by $2.25 million. If this is enough to bring your estate value under the $11.4 million threshold, it might be worth considering. This is assuming that no additional income is generated by the estate. Another way to reduce the size of your estate is to remove life insurance proceeds from it. To do this, you would need to contact an estate planning attorney in Arkansas to help you set up an irrevocable life insurance trust. By putting your life insurance into a trust, you remove yourself from ownership and reduce the size of your estate while still ensuring that the proceeds will go to your named beneficiary. If this is an option you are considering, do it right away, as life insurance trusts are not excluded from the estate if they were established less than 3 years before your death. Another way to reduce the size of your estate is through charitable donations. These donations can be made directly throughout your life or can be made through different kinds of charitable trusts. Consult an experienced estate planning attorney for further explanation.
My Estate is Small. Do I Still Need an Estate Planning Lawyer?
Estate planning is not just for the wealthy. While “estate” calls up images of mansions and yachts, your estate is simply everything you own at the time of your death, including your home, bank accounts, retirement accounts, life insurance policies, and any other investments you may have. Even if your estate is relatively small, failing to have a comprehensive estate plan could result in major stress and headaches for your family as they try to sort out your financial affairs after you have passed away. A good estate plan also has provisions, called powers of attorney, for appointing people of your choice to take care of your finances and make financial, legal, and medical decisions for you if you are incapacitated. Without powers of attorney in place, you will have a court-appointed guardian to manage things for you if you are unable to manage for yourself. For most people, the idea of someone they did not choose handling all of their sensitive, personal, financial, and medical information is not a pleasing thought. Finally, if there is a chance that you might not be able to afford long-term care when you need it, an estate plan is especially important. A careful estate plan can help to ensure that financial help for long-term care is available to you if needed.
Why Should I Hire Dudeck Law Firm?
At Dudeck Law Firm, our focus is on estate planning and elder law. We have years of experience helping individuals and families minimize the burdens of gift and estate taxes, get help paying for long-term care, and ensure that their wishes are known and followed by their loved ones. We are here to help. Call Dudeck Law Firm today at 501-327-3527.