23 // Death and Taxes Recap (Taxes)

According to Benjamin Franklin, death and taxes are guaranteed. Just because they're inevitable doesn't mean we can't plan for them. This week, Sam and Wealthquest Director of Tax Planning, Brandon Butcher, tackle the planning stage of estate taxes. They talk about how to maximize the benefits of tax planning, along with specific action steps.

They also dive into some of the most common misconceptions around estate planning and estate tax. Brandon shares how estate taxes are computed, discusses exclusions, and explains what high-end estates need to be aware of. He also explains the basis step-up, which reduces taxable gains.

Episode Highlights: 

[04:37] Estate taxes are a tax on the transfer of all of your assets upon your death. The tax amount is the fair market value on the day of your death. The total of everything is the gross estate.

[05:30] There are deductions allowed including mortgages, debts, administrative fees, property that passes on to a surviving spouse, and qualified charities.

[05:56] After the net amount is computed, the value of lifetime taxable gifts is added to this number, and then the tax is computed. The taxes are then reduced by available unified credits.

[07:06] There is an annual gift tax exclusion of $18,000 in 2024.

[08:06] The federal lifetime exclusion is $13.61 million per person in 2024. 

[10:03] Most simple estates don't require the filing of estate tax returns. 

[12:27] The exemption is expected to go back down to $7 million in 2026, so high net worth individuals need to plan accordingly and revisit their estate plan.  

[15:15] Estate taxes aren't going to affect everyone. 

[17:59] Brandon helps clear up gift tax exclusion confusion. If the limitation is exceeded, a gift tax return is filed. Anything over the limit goes into the lifetime exemption. 

[20:41] Cost basis receives a step up at its fair market value at death which reduces the tax gains the heir is liable for. 

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

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