The federal estate tax is a tax on a decedent’s gross estate which includes all of the individual’s assets, their share of any jointly owned assets, and proceeds from any life insurance policies. The value of the assets for federal estate tax purposes is based on their value as of your date of death rather than on the original purchase price of the assets. Thankfully, most estates are not impacted by federal estate tax because, under current legislation, an individual can own up to $13.61 million in assets ($27.22 million for married couples) at their death without their estate being subject to federal estate tax. If an estate exceeds a value of $13.61 million in 2024, the executor must file a federal estate tax return within nine months of the person’s date of death. The tax is then levied on the value of the estate over that exemption amount, usually up to the top rate of 40%. This exemption amount will be increased to $13.99 million in 2025. However, if Congress does not renew the current exemption amount by January 1, 2026, the federal estate tax exemption will automatically decrease to $5 million ($10 million for married couples), indexed for inflation.
It is important to note that spouses do have special exceptions regarding estate tax. There is an unlimited marital deduction, which means any part of an estate left to a surviving spouse is not subject to federal estate tax (although those assets may be taxed at the surviving spouse’s death). A spouse may also preserve any unused portion of a deceased spouse’s federal estate tax exemption and have it applied to their own estate in the future. This preservation process is called “portability” and is done by the surviving spouse filing a federal estate tax return for the decedent, regardless of the size of their estate, and electing the portability on that tax return. These changes in the exemption amounts have the potential to disrupt the estate plans of many high-income families. There is also a significant amount of uncertainty remaining on what the future holds for the federal estate tax exemption amounts. As such, it is a good idea to speak with an attorney regarding the strategies that can be used to minimize the ultimate tax bill on your estate if you believe your estate could potentially be impacted.
If you have further questions, we invite you to schedule a meeting with one of our experienced Trust and Wealth Management Officers by calling 1-800-899-8858 or by email at Trust@HillsBank.com. We look forward to serving you as your trusted advisor.
21
1st Quarter 2025
Investment products are not a deposit, not FDIC insured, not insured by any federal government agency, carry no bank guarantee, and may go down in value.
Made with FlippingBook - Online catalogs