There is an old saying that the only two certainties in life are death and taxes. In fact, you may still be responsible for taxes even after you die. The good news is that you can plan for the risks you know about, such as the taxes that will impact your estate.
Many people thinking about the end of their lives or the legacy they may leave behind after their deaths fail to recognize how taxes could alter their planning and diminish the effects their choices have on others.
Those in the process of creating or reviewing estate plans in Louisiana should understand tax obligations could affect what the people they love eventually inherit. What taxes could affect the inheritance of your beneficiaries?
Generally speaking, estate taxes only apply in scenarios where people leave behind millions of dollars. In 2022, the federal threshold for estate taxes is $12,060,000. Estates worth more than that could face a major tax burden of as much as 40% of the total value of the estate. Louisiana, thankfully, does not assess an estate tax, nor does it collect an inheritance tax from your beneficiaries.
You may have some income tax responsibilities when you die. The executor of your estate will typically have to file a final tax return for you and will use assets from your estate to pay any amount due.
If you leave instructions for the sale of some of your property, whether it is your vehicle, your house or your personal possessions, there could be income tax responsibilities for the estate itself. Any amount earned in excess of $400 could lead to income tax obligations and therefore will require planning to set aside funds to cover those taxes.
Capital gains taxes
The way that you transfer large assets, like your home, can potentially lead to major tax consequences for your beneficiaries. The method of transfer that you employ can have a major impact on those taxes.
People use a variety of estate planning tools, ranging from trusts to structured giving in their golden years, to reduce the tax risks associated with succession court proceedings. Learning about tax liabilities can help those planning their estates minimize what they lose to the government after they die.