Evaluating estate tax planning strategies

On Behalf of | Oct 13, 2020 | Estate Planning

As you begin the estate planning process in Michigan, you quickly notice that one of its main purposes is to help you optimize your plans in order to ensure that as much of your accumulated wealth as is possible passes on to your beneficiaries. Yet many of those come to us here at the Babut Law Offices, PLLC for assistance with this process believe that there is one potential liability people cannot avoid: estate taxes.

There is always the potential that your estate may be subject to federal estate taxes (the state of Michigan does not impose a local estate tax on its residents). However, with proper planning, you be able to limit (or avoid) that liability.

Understanding estate tax portability

Many tax benefits are portable between spouses. What this means is that you and your spouse share in them. Estate tax benefits are no exception. The federal government sets an estate tax exemption amount every year (per the Internal Revenue Service, that amount for 2020 is $11.58 million). Provided the total taxable value of your estate is less than that amount, it will not be subject to federal taxes.

Portability allows your spouse to claim the unused amount of your estate tax exemption. Imagine if you were able to preserve that entire amount (which essentially would allow your spouse to extend their exemption amount to $23.16 million). You can do that, thanks to the unlimited marital deduction. This allows you to pass on an unlimited amount to your spouse tax-free. Leaving your estate to your spouse upon your death does this (while preserving your estate tax exemption).

Planning to take advantage of portability

To elect portability, your spouse must file an estate tax return declaring that intention within nine months of your death. You can find more information on estate planning strategies such as this by continuing to explore our site.


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