Last-Minute Estate Planning for Tax-Efficient Transfers

As time ticks closer to major life events or year-end, taking steps toward estate planning can feel overwhelming. However, even last-minute actions can help minimize tax liabilities and provide clarity for your loved ones. As an Enrolled Agent with years of experience helping clients navigate the tax landscape, I want to guide you through practical steps to make your estate plan as tax-efficient as possible. Let’s break it down into manageable actions you can take today.

Get a Clear Picture of Your Assets

The foundation of any estate plan is understanding what you own. Take stock of your real property (homes, rental properties, land), financial accounts (checking, savings, retirement accounts), personal property (vehicles, jewelry, collectibles), business interests, and life insurance policies. Having a clear inventory of your assets helps identify what may be subject to estate or inheritance taxes. It also makes the process of allocation and planning much smoother.

Know the Basics of Estate Taxes

For 2024, the federal estate tax exemption is $12.92 million per individual. This means that estates below this threshold generally avoid federal estate taxes. However, some states impose their own estate or inheritance taxes, often with much lower exemption limits. For example, states like Maryland and Oregon have significantly lower thresholds.

If your estate exceeds state or federal thresholds, you might consider strategies like:

• Gifting assets during your lifetime (up to $17,000 per recipient annually in 2024 without triggering gift taxes)

  
  

• Leveraging the marital deduction, which allows tax-free transfers to a U.S. citizen spouse

Update Beneficiary Designations

One of the simplest and most effective ways to ensure a smooth transfer of assets is by keeping your beneficiary designations up to date. This applies to accounts such as IRAs, 401(k)s, and life insurance policies. Make sure primary beneficiaries are current and    contingent beneficiaries are listed, in case the primary is unable to inherit. Remember, beneficiary designations override what’s written in your will, so periodic reviews are essential.

Leverage the Annual Gift Tax Exclusion

The IRS allows you to gift up to $17,000 per recipient annually without triggering gift taxes or requiring a gift tax return. Married couples can double this amount to $34,000 per recipient through gift-splitting. This can be an efficient way to reduce your taxable estate while helping loved ones.

File Necessary Tax Forms

If you’ve made significant lifetime gifts, be sure to file IRS Form 709 (United States Gift and Generation-Skipping Transfer Tax Return). This ensures your lifetime estate and gift tax exemption is tracked accurately, avoiding potential issues down the line.

Even if you’re working on a tight timeline, taking these steps can help ensure your estate plan is as tax-efficient as possible. By organizing your assets, updating documents, and leveraging available tax benefits, you’ll provide peace of mind for yourself and your loved ones. And remember, professional guidance is always a valuable resource when navigating estate planning. If you need assistance, you can contact us at info@mkhstaxgroup.com.