Estate taxes are paid by a decedent's estate, which means heirs to the estate lose out of benefits. There are ways to reduce or avoid estate taxes, but they do not always apply. Speaking to an experienced estate planning attorney in Wisconsin is the best way to create a plan that benefits you today and protects your loved ones tomorrow.
Estate law can get pretty complex and undergoes changes relatively often, making it hard for clients to stay current. At Heritage Law Office, our estate planning lawyer will thoroughly review your estate and advise you accordingly. We know that informed clients make the best decisions about their finances. Contact us today either through our online form or at 414-253-8500 to schedule a free consultation.
What is an Estate Tax in Wisconsin?
Some states have an estate tax that must be paid when a person dies. This tax applies regardless of who inherits. Typically, the executor files a single estate tax return and pays the tax out of the funds of the estate.
An estate tax differs from an inheritance tax in that the beneficiary (or person inheriting from the decedent) is responsible for paying an inheritance tax. An estate tax and an inheritance tax are both different from a gift tax, which only applies to transfers that are made during the giver's lifetime.
Understanding Wisconsin Estates: State versus Federal Estate Taxes
Some states have an estate tax, while others have an inheritance tax, and still others have neither. However, there is a federal estate tax that is applicable to all states. Fortunately, the exemption amount is so high most people do not have to pay a federal tax.
For the year 2023, the federal exemption for an individual is $12.92 million, which means that they may leave their beneficiaries up to $12.92 million in property without having to pay any estate tax.
Who Pays the Estate Tax?
When someone dies, there is a person that is appointed in the decedent's Will, or by the court if there is no Will, that is in charge of administering the estate of the deceased. In some states, this person is known as the personal representative while in others they are known as the executor.
No matter what they are called, this is generally the person that is responsible for handling the payment of the estate tax. It is paid from the estate prior to its being distributed among the beneficiaries.
How to Avoid Estate Taxes
There are different ways to avoid having to pay an estate tax, including:
- Gifting property to family members
- Creating a trust
- Donating property to a charity
Which of these ways, if any, can apply will depend on the state and circumstances of each individual situation.
Benefits of Hiring an Estate Planning Lawyer in Wisconsin
An estate planning attorney is a lawyer that focuses their practice on helping clients create comprehensive estate plans that meet their short- and long-term goals. Benefits of having an estate planning lawyer on your side include:
- You have the peace of mind in knowing that your plans are compliant with local, state, and federal law.
- Your initial thoughts on what you desire in your estate plan may not be the best for your situation, and an estate planning lawyer will know this and explain better options to you.
- When you hire an estate planning attorney, your estate plan will be customized to address your unique needs.
Spending some money up-front on an estate planning lawyer can end up saving significant time and money down the road.
Contact an Estate Planning Lawyer in Wisconsin Today
It is always to your advantage to speak with an estate planning attorney in Wisconsin about your estate and what documents should be included in an estate plan. Our goals at Heritage Law Office are to make sure you benefit from an estate plan today and your family (and other loved ones) benefit when you die. Contact our estate planning lawyer by sending us a message or a call at 414-253-8500 to schedule a free consultation and to get started on a smart estate plan.
Frequently Asked Questions (FAQs)
1. What is an Estate Tax?
An estate tax is a tax levied on the estate of a deceased person before the assets are distributed to the heirs. It is paid out of the decedent's estate by the executor or personal representative of the estate. This tax applies irrespective of who the beneficiaries of the estate are.
2. How does Estate Tax differ from Inheritance Tax and Gift Tax?
Estate tax is different from inheritance tax in that the former is charged to the decedent's estate whereas the latter is paid by the beneficiary. In other words, estate tax is a tax on the right to transfer assets at death, while inheritance tax is a tax on the receipt of assets from an estate. On the other hand, a gift tax applies to transfers made during a person's lifetime and is paid by the donor.
3. Is there a federal estate tax applicable to all states?
Yes, there is a federal estate tax that applies to all states in the U.S., irrespective of whether a state has its own estate tax or not. However, the federal estate tax exemption is quite high, allowing individuals to leave substantial amounts to their beneficiaries without incurring any estate tax.
4. Who is responsible for paying the estate tax?
The estate tax is typically paid by the executor or personal representative of the decedent's estate. This individual is either appointed in the decedent's Will or by the court if no Will exists. The tax is paid out of the estate's funds before assets are distributed among the beneficiaries.
5. Can an estate tax be avoided?
There are certain strategies that can potentially help avoid or minimize the impact of the estate tax, such as gifting during one's lifetime, setting up certain types of trusts, and leveraging the unlimited marital deduction. However, the application of these strategies depends on the individual's specific circumstances and state laws, making it beneficial to consult with an estate planning attorney.