Do you have a plan to protect your inheritance from property taxes? – Family and matrimonial


United States: Do you have a plan to protect your inheritance from property taxes?

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When you create an estate plan, you help ensure that the people you care about inherit your assets when you die. Careful planning can maximize the resources you leave to others and minimize the liability for your estate or its beneficiary.

Many people planning their estates in Hawaii could lose a substantial portion of their intended inheritance to estate taxes. Inheritance taxes apply to the value of property someone leaves behind upon death and can reduce what beneficiaries ultimately receive because the executor must pay these taxes before distributing any property.

Have you thought about how inheritance taxes might affect your loved ones after your death?

You may need to worry about state and federal property taxes

Hawaii is one of the few states to impose its own inheritance tax. Once the total value of your estate reaches $ 5.5 million, it is subject to state property taxes. The maximum rate of property taxes in Hawaii is 20% of the value of the estate, in addition to any federal estate tax.

If your estate is large enough to pay federal property taxes, you could lose more than half of its value in taxes alone. Currently, your estate must be worth more than $ 11.7 million to trigger federal property taxes. Qualifying estates stand to lose a lot without careful planning, as the federal estate tax has a maximum tax rate of 40%. The higher the value of your estate, the higher the tax rate that applies to it.

How do you plan for property taxes?

Those who own businesses or real estate are at a higher than average risk of triggering inheritance taxes after they die. There are many ways people can plan ahead and minimize these taxes.

Strategic gifts to family members can be one approach. Another method is to transfer large assets to a trust so that they are not technically part of your estate. Proper succession planning for your business or updated title documents for your home could reduce your risk of estate taxes affecting your inheritance.

Learning more about the challenges of high asset succession going through the Hawaiian probate process can help you plan to maximize what you leave for the people you love.

Originally posted Nov 12, 2021

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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