Do you have a will? If so, you are already ahead of many people in the estate planning process. The AARP reports that as many as 60% of U.S. adults have a will. As important as it is to write a will, it is not by itself sufficient. You need a more comprehensive estate plan—especially if you have assets that you want to protect. Proactive tax planning is a must. Here, our Greenfield tax preparation and planning lawyer explains how the right plan can help safeguard your estate.
Safeguarding Your Assets: Five Big Tax Issues That You Need to Consider
- Will You Have Estate Tax Liability?
The estate tax is a tax imposed on the transfer of a deceased person’s assets if the total estate value exceeds a certain exemption threshold. It is important to understand whether or not you are likely to have an estate tax liability. If you may be subject to estate tax liability, proactive planning is a must. There are tax strategies that you can use to help protect your hard-earned assets.
As noted by the Internal Revenue Service (IRS), the estate tax exemption for 2025 is $13.99 million for an individual. Under current law (February 2025), the exemption will be cut by 50% starting in 2026. However, federal lawmakers could still extend the increase. This is an issue worth watching for high-net-worth families.
Note: Indiana does not have a state-level estate tax. In 2013, Indiana lawmakers repealed the inheritance tax.
- Giving Gifts (Tax-Free vs. Taxable)
Gifting assets can be an effective estate planning strategy. It can also be a great way to provide support to your loved ones now. Under federal law, people can give up to a certain amount per year—an amount known as the annual gift tax exclusion—to each recipient without triggering gift tax. The Internal Revenue Service (IRS) explains that the annual exclusion for the gift tax is $19,000. Any gifts above this amount may be subject to federal gift tax. However, there are also some additional exclusions. Indeed, some gifts—such as payments made directly to educational institutions or payments to medical providers―may be entirely tax-free if done the right way. If you are considering using a gifting strategy, an experienced Indiana tax planning attorney can help.
- Leaving the Most to Good Causes (Charitable Trusts)
Are you interested in leaving money or property to support a good cause? If so, you should strongly consider setting up a charitable trust. There are two different options available for charitable trusts:
- Charitable Remainder Trust: A charitable remainder trust (CRT) allows you to receive income from the trust during your lifetime. Whatever the remainder of the value of the trust is will then go to a charity of your choosing upon your passing. It is a structure that can provide significant tax benefits, including an immediate charitable income tax deduction and the avoidance of capital gains tax on appreciated assets.
- Charitable Lead Trust: A charitable lead trust (CLT) is the other primary option for tax-advantaged charitable giving as part of an estate plan. It provides payments to a charity for a set period before the remainder passes to your beneficiaries. A potential benefit is that it can help to reduce estate and gift taxes.
- Managing Life Insurance Benefits (ILIT)
In some cases, there are tax strategies that can be used to effectively manage life insurance benefits. One powerful tool is an Irrevocable Life Insurance Trust (ILIT). Without proper planning, life insurance proceeds may be included in your taxable estate, potentially leading to a substantial estate tax burden. An ILIT removes life insurance policies from your estate by making the trust the policy owner. Upon your passing, the benefits can be distributed to your heirs free of estate taxes. Beyond that, an ILIT can provide liquidity to cover estate taxes and other expenses without forcing the sale of valuable assets. It should be noted that ILITs are irrevocable. They require a careful structure and should be set up by an experienced professional.
- Protecting the Value of Your Home (Qualified Personal Residence Trust)
If you own a home in Indiana, there are special options available. You can protect the value of your home through a Qualified Personal Residence Trust or QPRT. A QPRT allows you to transfer your home into a trust while retaining the right to live in it for a set period. It is a strategy that can significantly reduce estate taxes because it freezes the property’s value for tax purposes at the time of transfer. That amount is often far lower than the future of the home after accounting for appreciation. If you outlive the trust term of a QPRT, the home is removed from your taxable estate. If you have any specific questions about QPRTs, an experienced Indiana tax preparation attorney can help.
Why Trust White & Jocham to Help You Set Up a Comprehensive Estate Plan
Tax planning is one of the most important—and, too often, overlooked—aspects of estate planning. An effective tax preparation strategy can help to safeguard your assets. If you have a lot of questions about your options, you are certainly not alone. At White & Jocham, we make taxes easy. Our firm handles estate planning, elder law, and tax planning. We know that a one-size-fits-all solution is not good enough for you and your family. Our Greenfield estate planning and tax planning attorneys are ready to invest the time and resources to help you find the right solution for your specific situation.
Contact Our Indiana Estate Planning and Tax Planning Lawyers Today
At White & Jocham, we are committed to helping clients protect their estates. If you have any specific questions or concerns about tax planning strategies, we are here to help. Contact us today for a fully confidential, no-obligation initial consultation. With a law office in Greenfield, we are proud to serve clients in Hancock County and throughout the Indianapolis metropolitan area.