Taxes are one of those things that will still come after you, even after you die. When transferring assets from your estate to heirs, the government may issue a tax.
Typically, estate taxes only occur for larger estates, but if it is a concern because of your net worth, it is well worth it to plan ahead to minimize your estate’s tax obligations. One option is to gift assets right now while you are still alive. Gifting them will bring down your asset value, thus lessening your estate taxes.
There are restrictions on how much you can gift without causing a tax burden for the person receiving the asset. The IRS does allow you to give a person up to a certain amount each year without taxing it. For 2021, the amount was up to $15,000.
You can also avoid taxes by giving to charity. You can do this in a lump sum or through a trust that will give over time or hold assets that will become the property of the trust upon your death.
One thing to watch out for is gifting the wrong types of assets. You want to avoid giving away assets that will grow in value because taxation can get tricky for these types of assets, and it may be more beneficial for your heirs to get these after your death.
It is a good idea to work closely with a professional who understands the tax laws and estate laws when deciding to gift assets to heirs before your death. Ideally, the goal should be saving as much as possible on taxes.