Estate planning is about more than deciding who gets your assets; it also involves making sure those assets don’t get eaten up by taxes.
While Indiana doesn’t have its own estate or inheritance tax, your estate could still face federal estate taxes. Fortunately, with the right strategies, you can help protect the wealth you’ve worked hard to build and pass it on to your loved ones.
Maximize your annual gifts
One effective strategy to reduce estate taxes is to give away some of your assets while you’re still alive. The Internal Revenue Service allows you to gift up to a certain amount each year, tax-free. In 2024, for example, you could give up to $18,000 per person without it counting toward your lifetime estate tax exemption.
You can give this amount to as many people as you like, including your children, grandchildren, or even friends. By doing this every year, you can reduce the overall size of your estate and, consequently, reduce its tax burden.
Set up a trust
A trust allows you to transfer your assets to a trustee for the benefit of your beneficiaries. Certain types of trusts, such as irrevocable trusts, can help you avoid estate taxes because the assets in the trust no longer belong to you. Instead, the trust owns them, so they aren’t part of your estate’s taxable value when you pass away. This can significantly reduce the amount of taxes your heirs would have to pay.
Using these strategies, you can limit the tax impact on your estate. Proper planning can ensure that your heirs receive the maximum possible benefit from you, leaving an enduring legacy.
