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Do you need to address estate taxes in your Michigan estate plan?

On Behalf of | Sep 6, 2022 | Estate Planning

Michigan law gives you the right to control what happens to your property when you die. Through the creation of a will and possibly a trust, you can pass your most valuable belongings to someone specific after you die. You can even control exactly what people use their inheritance for if you create a trust.

However, if you have sizable personal property, your estate could be subject to taxes that would drastically diminish how much you can pass to your loved ones after you die.

Do you need to address estate taxes in your Michigan estate plan?

The good news for those living in Michigan is that it is one of more than three dozen states that do not levy an individual, state-level estate tax. Regardless of how much property you have in your own name when you die, the state of Michigan will not lay claim to any of it.

However, you may still have to pay estate taxes to the federal government.

How much property can you protect?

There is a limit to the value of your estate that you can exempt from taxes. After a certain point, the federal government will expect you to pay taxes on the wealth that you leave behind when you die.

The larger your estate is, the more likely you are to pay taxes. In fact, the tax estate rate is progressive. The more you exceed the limit for an estate, the higher the tax rate you pay. Any estate worth more than $12,060,000 may be subject to federal estate taxes. The highest possible tax rate could be 40% if you don’t plan ahead.

Especially if you have multiple pieces of real property or a business in your name, your estate could be subject to federal taxes that drastically diminish what your loved ones receive.

There are ways to plan for estate taxes

Depending on your age, the nature of your resources and the wishes you have for the use of that property after your death, there are numerous viable solutions for minimizing estate taxes. Trusts created the whole valuable property in your name are a good solution for some people, while annual gifts to others can work for some people.

Reviewing the property that you hold and the goals for your estate plan can help you determine the best strategy for minimizing your estate tax risks.