The following article is dealing with gift tax issues and not Medicaid issues. For Medicaid transfers, any transfer over $500 is looked at as an improper transfer. Before making any gifts, you should consult with your attorney.
You’ve worked hard for all you’ve earned, and when you pass on, you want to be sure that all your possessions find their way to your loved ones. Unfortunately, if you don’t take the proper steps, a significant portion of your assets can be diminished by estate taxes, gift taxes, and other tax burdens. Estate tax planning is one of the most overlooked aspects when it comes to the estate process, but it’s also one of the most important. Working with an experienced estate planning attorney can help set you and your family up for the future.
The Types of Taxes That Affect Your Estate Plan
When it comes to estate tax planning, there are a few different types of penalties you’ll need to be on the lookout for:
- Estate Tax. The federal estate tax is assessed on assets that are transferred from one party to another after the benefactor passes away. The government sets aside an exemption limit, so that only estates valued over a certain amount are subject to this tax. The limit in 2025 is $13.99 million per individual and $27.98 million for married couples.
- Gift Tax. The gift tax applies to any asset that is given to someone else without fair market compensation. As with the estate tax, there is an exemption limit, in this case calculated yearly. As of 2025, an individual can gift $19,000 and a married couple $38,000 to any other individual without triggering the tax.
- Generation-Skipping Transfer Tax. The generation-skipping transfer tax is levied when a person leaves their assets to a grandchild while ignoring a still-living child. This generation-skipping strategy had been used by wealthy individuals to avoid estate taxes, and this tax essentially closes the loophole. It applies only to transfers of over $13.99 million and results in a flat 40 percent tax.
Strategies for Estate Tax Planning
In order to avoid being hit with an unexpected tax penalty that could prevent your loved ones from receiving their proper inheritance, it’s important to take action now. The following estate tax planning strategies can help secure your legacy:
- Gift Assets to Your Beneficiaries. In order to reduce your estate tax liability when you pass on, you can gift assets to your loved ones now, subject to the maximum yearly exemption. This can allow you to reduce the value of your estate below the tax threshold, while still ensuring that your loved ones are provided for.
- Make Charitable Donations. Charitable donations are a great way to reduce your tax burden, as these donations are subject to a tax deduction. You can use your estate to better the world, while reducing your taxable assets at the same time.
- Set Up an Irrevocable Trust. Setting up an irrevocable trust is one of the best tools available when it comes to estate tax planning. In an irrevocable trust, you transfer assets from your taxable estate into a separate trust that is managed by a trustee. This reduces the value of your estate for tax purposes. By shifting the tax burden, an irrevocable trust can help protect your assets in a way that a will could not. In addition, a trust allows your estate to bypass the lengthy and burdensome probate process.
Contact the Experienced Attorneys at Deliberato Law Center
Estate tax planning is a complicated business, but by working with an experienced attorney, you can easily navigate the ins and outs of the process and help secure your legacy. At Deliberato Law Center, we have many years of experience helping our clients ensure that they and their family are well provided for. Give us a call at (216) 341-3413, go to our Contact Page, or fill out the form below and start resting easy today.
