When it comes to estate planning, there are a lot of things to watch out for. In North Carolina, we are lucky that there is no estate tax. However, that doesn’t mean that we don’t have any other taxes to worry about! In this blog post, we will take a look at some of the most important taxes to consider when planning your estate. Contact an experienced estate planning lawyer in North Carolina today for help with your specific situation.
Estate Planning is Key
Planning your estate can help reduce taxes of all kinds. In North Carolina, there is no estate tax, also known as the “death” tax. However, there are other taxes to watch out for in our great state.
Annual Gift Tax Exclusion: For 2022, the yearly exemption is $16,000. Gifts of less than $16,000 per year to one individual are not taxed. You can also pay for certain non-taxable educational or medical costs for your children or grandchildren, such as tuition at a university or medical bills. If you have a big estate, you may decrease the size of your estate each year by giving non-taxable amounts of money and gifts to friends and family.
Inheritance Tax in North Carolina: In North Carolina, there is no inheritance tax. However, these taxes are sometimes required for other reasons. These are just a few of the taxes that you should think about while preparing your will.
- IRA’s that distribute large amounts of income each year according to the new 10-year payout rule may cause heirs to pay taxes on the distributions
- Capital gains taxes on some types of trusts.
- Heirs may also pay taxes on any jointly owned property they wish to sell because it will not step up in basis when you pass away. Instead, your heir will face taxes on the massive increase in value if the property has appreciated since you first bought it.
- Capital gains tax rate on the profit when selling an inheritance later. If you leave a grandchild $100,000 in bitcoin but then he sells it for a profit 3 years later, he will likely owe capital gains tax on the profit he makes.
Working with an estate planning lawyer may help you avoid financial landmines for your descendants. Laws change every year, and what was formerly true is no longer valid. That’s why working with a knowledgeable estate planning attorney makes sense.
Estate Taxes (Death Tax) in North Carolina: Although North Carolina does not have an estate tax, there are still some states that impose one (i.e., the death tax).
The Federal rules, on the other hand, are somewhat more stringent. If your estate is worth more than $11.4 million, you must pay the Federal Estate Tax (Death Tax). This federal tax is levied on the full value of your estate and is due nine months after your death. You may also leave property and assets to your spouse without incurring any estate tax.
As you can see, there are a lot of things to think about when it comes to estate planning in North Carolina. However, with the help of an experienced attorney, you can make sure that your estate is properly planned and that your loved ones are taken care of after you’re gone.
Individual Income Tax: After you pass away, your Federal and North Carolina income taxes are due by the end of the following year, according to the IRS. “All money earned up until death must be reported, and any credits or deductions to which the deceased was entitled may be claimed,” it says. Your estate administrator is in charge of this requirement.
Estate Income Tax: After you pass away, your estate must pay this tax if it produces more than $600 in annual gross income. In this situation, your estate’s taxes and your income taxes are distinct. The majority of individuals do not have to pay an estate income tax.
Trust Income Tax: Any income earned by a trust is subject to U.S. federal income taxes, which are payable by April 15 of the following year. Each year that the trust has $600 or more in revenue, it must file Form 1041, US Income Tax Return for Estates and Trusts.
Avoid Probate Expenses
If the value of your estate is more than $20,000 or $30,000 when you die, it will have to go through probate. This means that after you die, someone will inventory your belongings and make a list of them. They will also have to say how much your estate is worth. This is all public information.
The estate pays attorney and court costs in probate court. In addition, your estate may pay your administrator for their work closing the estate. Probate might take years to complete. Creditors get a cut and the public nature of probate encourages family bickering and disputes.
If there are no will disputes or family conflicts, your administrator distributes inheritances to your beneficiaries after the creditors and taxes have been settled. Probate is a time-consuming procedure that may be entirely avoided with appropriate foresight.
By establishing a trust, you can avoid probate and keep inheritance values secret. To perform many financial goals, such as avoiding probate, your attorney can assist you in creating a trust for your specific financial goals.
Create a Trust As Part of Your Estate Plan
A trust is a legal way to own property, which can help protect it from personal liability and other threats. There are many things a trust can do, including:
- Prevent heirs from paying capital gains taxes
- Help an estate pay less in taxes
- Prevent the new retirement fund taxes on heir’s distributions
- Avoid probate expenses
Planning your retirement and inheritance goals using trusts is a smart thing to do. You can use an estate planning attorney to help make it simpler.
We Can Help
You want to make sure that your loved ones will get the inheritance you want them to have. You don’t want any extra or unexpected expenses to come up and reduce what they receive. That’s where we can help. At Cape Fear Law, we know about estate planning and how to minimize the costs of inheritance taxes, probate, and other expenses. We keep up with the changes in tax law so that you don’t have to. Contact us today to learn more about how we can help you plan your estate.
An improperly planned estate can cause a lot of problems for your loved ones after you’re gone. Make sure that doesn’t happen by working with an experienced estate planning attorney. Give us a call today to schedule a consultation to start protecting your loved ones and your legacy.