One of the biggest drains on any estate is taxes. Estate planning can substantially reduce -- or even eliminate -- the taxes that would otherwise be owed on a person's estate upon death. Making use of federal gift and estate tax exemptions is an integral part of a successful estate plan for wealthy Washington, DC, residents.
For 2015, the federal government raised its estate tax exemption to $5.43 million. This means that any assets valued up to that amount can pass to heirs and beneficiaries free from estate tax. Married Washington, DC, residents often reap the most benefit from this exemption because, whatever amount one spouse's estate does not use may be added to the surviving spouse's amount.
This amount also affects the amount of gifts an individual can make during his or her lifetime. He or she can make as many gifts as desired up to that amount tax free. In order to make the most of this, keeping annual gifts at no more than $14,000 per person is essential. This is because so long as gifts remain no higher than that amount, it does not reduce the amount of the exemption, but it does reduce the amount of a person's taxable estate.
How a person's estate plan is documented plays a large role in reducing taxes, but using exemptions is also critical. Estate planning can go a long way to ensuring that an individual's family receives the maximum benefit possible from his or her estate. The plan's creator can rest easy knowing that his or her beneficiaries and heirs will be taken care of even after he or she has passed away.
Source: marketwatch.com, "3 important things to know about estate planning", Bill Bischoff, Feb. 11, 2015