Facts You May Not Have Known About Estate Taxes

Thinking about passing on your estate to your children or grandchildren? 

You best cross your “t”s and dot your “i”s.

If you are thinking about passing on your estate, you have probably heard rumors about taxes. But what do they mean for you and your family? 

Here, we will dive into 5 fascinating facts about estate taxes so you have a better idea of what to expect. 

South Carolina Is an Ideal State to Pass Away In

Estate taxes vary from state to state. Some states enforce estate taxes, although the amounts change. Others do not enforce them at all. 

South Carolina is one of the states that does not impose either estate or inheritance taxes. Prior to 2005, the state had a “sponge tax” which took a portion of estate taxes given to the federal government. 

Now, however, the state does not impose any “death” tax. 

Other citizens are not so lucky and must pay careful attention to tax laws. Regardless of how carefully individuals have drawn up a will, inheritors may face stiff taxes depending upon location. 

Estate Taxes Do Not Apply to Most Americans

Put your fears to bed: the estate tax does not affect most Americans. In fact, you must be in the wealthiest tier of citizens to experience the tax. 

Prior to 2017, only 2 in 1,000 estates faced a tax. That number fell to 1 in 1,000 after exemptions doubled.

More than likely, the estate tax will not affect you or your family. Of course, that does not mean you should not partake in estate planning

Many Families Might Be Shocked in 2025

In 2025, exemption rates will drop to half what they are now, affecting estates worth approximately $5.5 million per individual.

Because the rates increased recently, many families assume the tax will not ever apply to them. The change may come as a nasty shock to many. 

This, again, is why estate planning is so important. Changes in tax laws mean individuals should update wills regularly, otherwise they may find themselves in a similar situation as actor Philip Seymour Hoffman’s family

Hoffman left his estate to his only child at the time he drafted his will but failed to update it after tax laws changed and he had additional children. Consequently, his wife and remaining children suffered. 

Other Countries Tax More

America has an estate tax rate at 40%. Does that sound steep? Not compared to some other countries. 

Japan has the highest rate of all at 55%. South Korea follows with 50% and France comes in third with 45%. 

America falls fourth in line when determining which countries have the highest estate taxes.

It Is Nothing New

The estate tax has existed for centuries. In fact, it was common during the medieval era. 

During this period, kings demanded payment in the forms of “reliefs” from heirs who received property. It was from this notion that many European countries created the idea of inheritance and estate taxes. 

Protect Your Family’s Future

Estate taxes may not concern you. However, it is important to understand the changing laws regarding wills, property and more so that your family is secure. 

Changes in your personal life as well as in the government may have unforeseen results, which is why our professionals are available to help. We will ensure your family is protected from these changes, and we will work to create an estate plan that reflects your legacy. 

Call us today to discuss strategies and to secure your family’s future.  

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3 Tips for a Paying a Low South Carolina Estate Tax

You love your family more than anything, and you want to ensure that they have every opportunity to thrive–even after you are gone.

Life happens in the blink of an eye. You have no way of knowing what will happen tomorrow, but you can take steps to protect your family in the future with your estate. 

Of course, it is not as simple as naming your family members as beneficiaries of your assets. You also have to deal with the South Carolina estate tax.

Here are three tips to help you sidestep the estate tax and ensure that your family gets the maximum benefit. 

Generation-Skipping

Generation-skipping, sometimes done via a generation-skipping trust, is when you transfer a portion of your estate assets to your grandchildren rather than passing the assets to your children. 

Typically, your assets are taxed twice on the way to your grandchildren: first, when they pass from you to your children (second generation), and again when your children later transfer them to their children (third generation). 

Generation-skipping sidesteps the intermediate tax. The downside, of course, is that your children cannot access assets that get designated to your grandchildren (which your children may not be happy about). 

Most people take a moderate approach. They designate as many assets to their children as they think they will need and elect the excess be apportioned to their grandchildren. 

Lifetime Gifts

If you are not entirely comfortable with generation-skipping, you can take a more proactive approach with lifetime gifts to your children and grandchildren.

This is precisely what it sounds like: rather than waiting for your assets to pass when you die, you directly gift part of your assets to your children and grandchildren. 

Every year, a person can make a gift of up to $12,000 without incurring a gift tax. If both you and your spouse give the maximum amount, you can collectively gift away $24,000 per year per recipient. This gift, in turn, reduces your taxable estate. 

It does require you to be comfortable giving away a portion of your assets while you are still alive–or have the financial bandwidth to do so. If you are worried about running out of money, though, this may not be the right choice for you, as it is inordinately difficult to reclaim this money once you have gifted it away.

Put Your Assets in a Trust

Ultimately, the only real way to protect your whole estate against taxes is to put it in a trust, though most people are wary of this option since it signs control of your assets over to someone else. 

First, keep in mind that there are many different types of trusts you can create, and you can designate almost anyone to manage the trust for you, including a family member. 

If you do decide to establish a trust, though, it is essential to work with an estate planner, as there are many rules and exemptions attached to trusts that you may not be aware of. 

Need Help Figuring Out South Carolina Estate Tax?

At Indigo Family Law, we know that family is the only thing that matters. We also know that time flies, especially for busy parents.  That is why we are here to help you figure out the South Carolina estate tax–or whatever else you might need.

If you would like to speak with a lawyer about your options, use our contact page to get in touch.

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