Q: Our age is such that we are focused on getting things in better order. We have some questions. First, how much can you have in your estate without having to file a federal return and just how is that value determined?
R.H., Hermosa Beach
A: I would be remiss if I did not start by encouraging you to consult with a qualified estate and trusts lawyer. This column can provide the benefit (and the detriment, possibly) of only a summary response.
You must file an estate tax return if the amount of your estate exceeds a certain dollar amount. The fair market value of your assets is determined, which may not be what you paid for them or what the value was when you acquired them. Your estate consists of all that you own or have certain interest in, at the time of your death.
This includes cash, securities, insurance, trusts, annuities, business interests and real estate, as well as other assets (such as personal property, including jewelry and art). You are allowed certain deductions in determining your taxable estate (for example, mortgages and administration expenses). These are among the factors that come into focus when establishing a total taxable estate.
Bottom line, for 2023, you will have to file a federal estate tax return if your gross estate is valued at more than $12,920,000.
Q: Next question: If we give gifts, how much can we give without taxes being imposed?
R.H., Hermosa Beach
A: For 2023, the tax-free gift limit is $17,000. You can give up to $17,000 without having to worry about paying the federal gift tax. Your spouse can do likewise (so combined, you can give up to $34,000 per person). If you do have to pay a gift tax, typically then it is you (the one giving) who has to pay it, but if you don’t pay, then the one who was gifted may have to pay. The federal gift tax ranges from 18% to 40%, so avoiding it makes sense.
Q: Final question: Will our kids be taxed on their inheritance from us?
R.H., Hermosa Beach
A: Again, this is best evaluated…
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