Estate planning could involve more than deciding what assets to leave beneficiaries. Maryland residents might wish to address some responsibilities associated with any tax implications following their passing. Understanding 2023 estate and gift tax rates could help a planner make appropriate decisions and convey information to the executor and surviving relatives.
Estate and gift taxes
Probate might include paying estate taxes based on current federal rules when someone passes away and bequeaths assets. Most estates do not pay estate taxes because they are below the exemption amount. In 2023, the estate tax exemption will increase from $12.06 million to $12.92 million.
Estates not exempt could pay up to 40% of the amount beyond the exemption. No federal estate taxes come into play when the estate falls below the exemption amount.
Gift tax exclusions could allow an estate planner to help reduce the estate’s tax burden. In 2023, the gift tax exclusion increases to $17,000 per year. Giving qualified beneficiaries a tax-free $17,000 gift per year reduces what they would receive from a will, while reducing the estate tax threshold.
Such 2023 figures refer to federal taxes collected by the IRS. Maryland state law establishes estate and inheritance taxes that might have to be paid.
Concerns about filings
Maryland estate planning could involve choosing an appropriate executor to handle tax filings and other duties. Sometimes, such planning could take place before the testator passes. Assigning power of attorney responsibilities might be necessary to help deal with tax matters in advance of probate.
A power of attorney allows someone to sign documents in another person’s name legally. Such authority allows the attorney-in-fact to file tax returns and write checks for the person they represent. There are many other duties that someone awarded power of attorney can handle. Sometimes, that person may be more qualified to perform tasks for an elderly individual or someone too young to understand certain responsibilities fully.
