While planning your estate in Illinois, knowing about federal estate and gift taxes can help you maximize your annual exclusion limits. Donating to charity, using the annual exclusion and starting a grantor-retained annuity trust offer a few potential solutions. Failure to use your money now may result in a significant loss of wealth to pass on to future generations.
Ways to maximize your gifts
Estate planning gets complicated when you have millions of dollars to your name. The annual exclusion currently allows gifts of $15,000 a year per recipient. When planned for early enough, this can add up to a substantial amount of wealth for the individual or trust that you designate.
Planning ahead to handle limits on tax exemptions ensures your money goes to good use. Donations to charities can reduce your income tax liability when distributed in the correct manner. Appreciated assets make a good solution for donations since they won’t count as a sale. Donor-advised funds and charitable split-interest trusts also offer a way to reduce tax liability.
Another option to reduce tax liability involves transferring assets to a grantor retained annuity trust. Beneficiaries can receive any return from an annuity that is tied to the applicable federal rate without paying taxes. Creative and legal ways to maximize your estate wealth do exist. Starting early on in the process of planning for your tax-exemption limits can help you avoid complications later on down the line.
Preparing for an inevitable rise in tax rates
The current estate tax exemptions provide limits for singles and married couples. These exemptions expire in 2026. Experts speculate an inevitable increase in tax rates at that time. Preparing wisely with the proper support from an attorney can help preserve and protect your assets.