Estate Protection

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What Is Estate Depletion?

The estates people leave for heirs at death can be depleted by taxes and other expenses that become due at the time of death. Without proper preparation, these costs can take a significant bite out of what’s left to pass on to the heirs.

What Are Some of the Costs?

Some costs are associated directly with the individual’s death, including end-of-life medical expenses, funeral expenses and debts remaining unpaid at the time of death. Other costs are the result of administering the deceased person’s estate. These can include attorney’s fees, executor’s fees, appraiser’s fees, court costs and probate expenses.

What About Taxes?

Estates that exceed a certain dollar limit specified in the tax code become subject to the federal estate tax. For larger estates, this tax can be extremely burdensome. In 2020, estates that exceed the federal estate tax applicable exclusion of $11.58 million are subject to tax at a top rate of 40%. Some states also impose their own estate and/or inheritance taxes.

Why Is All of This Important?

For people whose estates are subject to the estate tax, proper planning can diminish the effects of taxation. Without a good strategy, a huge portion of an estate can be consumed by taxes and other costs.

What’s the Solution?

Estate owners can take action to ease the financial problems associated with death. Minimizing estate shrinkage is the purpose of an estate review with a qualified advisor. Reaching decisions about property ownership, transferring assets, establishing trusts and making other arrangements can fulfill the individual’s wishes and, perhaps most importantly, mitigate the effects of taxation.