Law Office of Meghan A. Bodie

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Caring And Committed To Families And Children

The attorney at Law Office of Meghan A. Bodie is passionate about resolving family law issues efficiently and ethically.

Law Office of Meghan A. Bodie

Caring And Committed To Families And Children

The attorney at Law Office of Meghan A. Bodie is passionate about resolving family law issues efficiently and ethically.

Preparing for the potential of estate taxes

On Behalf of | Jul 12, 2021 | blog, Estate Planning | 0 comments

Tennessee residents work hard throughout their lives accumulating assets in order to pass that wealth on for the benefit of their family and friends. The estate planning process offers plenty of opportunities to preserve assets (such as settling debts before one’s death and utilizing estate instruments to avoid probate). Many may resign themselves to the notion, however, that one cannot do anything to avoid estate taxes.

However, that may not be the case. First and foremost, according to the website SmartAsset.com, the state of Tennessee does not impose a local estate tax. This means that the only potential tax liability local residents may face comes from the federal level.

Understanding the federal estate tax exemption

With the right estate plan in place, one may even be able to mitigate (or potentially even avoid) that liability altogether. The federal government offers an estate tax exemption. That amount for 2021 is $11.7 million. Married couples can utilize estate tax portability to extend that exemption amount even further.

Taking advantage of portability

Estate tax portability refers to the sharing of tax benefits between a married couple. To fully take advantage of portability, one needs to include another tax benefit in their estate plan: the unlimited marital deduction.

Should one leave their entire estate to their spouse, that amount passes tax-free thanks to the unlimited marital deduction. This preserves their entire estate tax exemption. According to the Internal Revenue Service, their spouse can then claim that unused exemption (and combine it with their own) by filing an estate tax return within nine months of their spouse’s death. That effectively doubles their own estate tax exemption for $23.4 million, preserving those estates for their beneficiaries.