Categories for Family Estate Tax Planning*

*Anchor Business Valuations & Financial Services, LLC are not attorneys, nor provide legal advice. From time to time in our blog entries we will share information that has crossed our desks that we believe our clients and potential clients might find beneficial in knowing (footnoted accordingly). As it pertains to estate and gift planning, Anchor has ~10 years of expertise determining the fair market value of assets.

Categories for Family Estate Tax Planning

Families are divided into 3 categories depending on the wealth they possess which directly falls under the present exemption levels. The necessity for a valuation depends upon which “bucket” the comprehensive estate falls within. The 3 categories include:

  • Families with assets under the individual exemption laws
  • Families that belong to the combined and individual exemption for couples with $23.16 million
  • Couples or families with high-net-worth wealth beyond combined exemption laws

It is comparatively easier to devise estate tax planning for ultra-high-net-worth couples because of the uncertainty related to the relaxation of lowered exemptions which is scheduled to drop in 2026. Nevertheless, the National US Congress could bring the dates closer or extend them longer to change the exemption laws.

Because of the ever-changing (or speculated as such) estate exemption thresholds, one should establish a multi-faceted estate plan with the help of existing exemption laws for a wide array of uncertain circumstances. For example, if an exemption is not used by a terminally ill individual, it can be passed on to the spouse, but the unused portion is lost if the exemption is lowered.

The state estate taxes vary greatly as compared to the federal estate tax laws within the United States. It is essential to consider the state laws more rigorously for specific conditions.

State exemption amounts differ widely from state to state. For example, the state estate tax exemption amount in New York is $5.4 million while it is $1 million in Massachusetts.

Estate planning could be broken down into small building blocks where you can begin with a will and then add a protective layer of trust. The biggest mistake is to do nothing at all when the present federal estate tax rate is set at 40%.

In the next segment, we will be back with interesting examples and facts on how to get maximum benefits of personal finance tax exemption rules for different states.