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Estate tax planning strategies

On Behalf of | May 1, 2023 | Estate Planning

When planning your estate, you should consider the tax implications of your decisions. There are many estate tax plan strategies that you may want to consider.

Roth IRA conversion

In some cases, people can pay less taxes by converting a traditional IRA into a Roth IRA. If they make this move, people do not have to worry about the 3.5% surtax. At least through 2025, when most tax laws expire, once the traditional IRA is converted to a Roth, the move cannot be undone. It is also possible to fund a traditional IRA and convert it to a Roth regardless of your marital status or income. Since spouses only have 10 years to take the funds out of an IRA when the person earning it dies, it may also make sense to set up other beneficiaries who pay a lower tax rate to receive these funds in your will as part of your estate plan.

Consider using the gift tax

In 2023, singles can give up to $17,000 and couples can give up to $34,000 without paying taxes, up to a lifetime total of $12.92 million per person. Therefore, you may save taxes by giving gifts to friends and family while alive. Note that most gifts to charities can be claimed as charitable donations and do not affect your limit. If you are paying tuition for someone, consider 529 plans because the tuition and supplies can count as a gift. Furthermore, this program has been expanded to include elementary and high school tuition.

Maximize deductions when itemizing

Some people may be better off using the standard tax deduction on some years and maximizing their deductions when they need to itemize. This can affect the timing of specific activities in your estate plan.

There are many things to consider when creating an estate plan. The most important one is to create a plan and follow it.