When you die, who gets your money? Your kids, you’d think.
Now that you know the estimated amount you have to give, most of the math is over. The rest of the calculations have to do with who gets what proportion of your assets.
This is not entirely yours to decide. There is a legally determined order of payments out of a person’s taxable estate. Assets in forms other than personal taxable accounts, such as through corporations, trusts, and individual retirement accounts, have different requirements. You should seek a trusts and estates professional if your estate plan includes such vehicles.
The starting point is the total amount of your assets. First tier is your liabilities, including any final income taxes, debts, funeral expenses and the expenses of administering your estate.
The next set of deductions from a taxable estate is the gifts made to charity. Then, the Internal Revenue Service collects estate taxes, if any. As of 2014, only estates with values exceeding $5.34 million must pay federal estate taxes. What is left over is the amount you can give to your heirs.
You need to make decisions for two levels: charitable gifts and bequests to taxable heirs. You decide exactly who gets how much, and on what basis.
Keep in mind that there are many nuances to these calculations that are beyond the scope of this article. For example, gifts and assets left to your spouse are exempt from transfer taxes, so long as you both are U.S. citizens. This is called the marital deduction. The IRS doesn’t tax the assets transferred between spouses.
Expert guidance is essential to navigate you through the complexities, and create an estate plan that maximizes the inheritance you leave your loved ones.
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