How Can Arizona Residents Use Estate Planning to Minimize Estate Taxes?

What Are Estate Taxes Laws in Arizona?

If you’re planning your estate, there are many factors to consider, primarily because you want your loved ones to have fewer challenges when distributing your property after your demise. A critical issue that often arises during estate planning is estate taxes, and it’s crucial to understand the concept to achieve the most favorable outcome.

Lawyers from a full-service law firm in Arizona highlight that Arizona imposes no estate taxes. Regardless of the size of your estate, you will not owe anything to the state. Additionally, Arizona has no inheritance tax. Nonetheless, you could owe federal estate taxes if the estate size is considerable.

Federal Estate Tax

Federal estate tax may apply to large estates in Arizona. However, there is an exemption for estates worth $13.61 million for unmarried individuals and $27.22 million for married couples. If your estate exceeds that amount, the federal tax rate applicable is 40%.

For example, if your estate is worth $20 million and you’re unmarried, the exemption of $13.61 million leaves a taxable estate of $6.39 million. Consult skilled estate planning lawyers in Mesa to guide you on minimizing federal taxes in your estate plan.

Why Is Estate Planning Important if Arizona Has No Estate Taxes?

Despite the estate tax exemption, estate planning remains crucial. It can help ensure your assets are divided as per your wishes upon your demise. It also provides peace of mind to your loved ones as they know what you want to happen to your estate once you’re gone. Mesa estate planning attorneys also highlight that estate planning:

• Avoid probate: If you pass on without an estate plan or intestate, Arizona intestacy laws will dictate the distribution of your estate through probate. The process can be intricate and emotionally draining for your loved ones.
• Highlights the rights of your beneficiaries: A well-drafted estate plan can help you maximize your loved ones’ inheritance by minimizing misunderstandings and conflicts that cause them to lose what they are entitled to receive.
• Helps you create a healthcare directive: Beyond specifying the division of your assets, an estate plan enables you to provide instructions regarding your healthcare if you become incapacitated.
  You can achieve these benefits with a carefully thought-out estate plan. Consult legal experts with experience in estate planning to help you get the most out of your estate plan.

What Strategies Can I Use to Reduce Federal Estate Taxes?

Estate planning entails combining various strategies to help you achieve the overall goal. However, you may not know how to utilize them without legal guidance from experienced estate planning lawyers in Mesa. Common strategies that can help you avoid or minimize estate taxes include the following:

Qualified Personal Residence Trust

A Qualified Personal Residence Trust (QPRT) lets you transfer your primary or vacation home into an irrevocable trust. However, you retain the right to live in the property for a specific period. Doing so helps you reduce the estate’s taxable value, potentially reducing estate taxes.

Drafting a QPRT requires several legal considerations and guidance from an expert. You must comply with legal requirements to optimize the tax benefits. So, consult estate planning attorneys in Mesa for legal insights into the document’s requirements and how it works.

Trusts

Trusts are practical tools for minimizing estate taxes. You can decide to use a revocable and irrevocable trust depending on your estate planning needs:

• With a revocable trust, you retain control of your estate while you’re still alive, and it helps your loved ones avoid probate when you’re gone
• An irrevocable trust takes out assets from your estate entirely, potentially reducing your estate tax bill. You can’t change or revoke an irrevocable trust without consent from the beneficiaries.

Legal experts can provide more information on the intricacies of these trusts. With this information, you can plan from an informed perspective to achieve the most out of the plans.

Retirement Accounts

You can use retirement accounts like 401(k)s and IRAs to minimize estate taxes. The accounts grow tax-deferred, meaning you don’t remit taxes on the increment until you start taking distributions. If you don’t need the proceeds in your lifetime, you can pass them to your heirs to give them a potential source of income.

However, inherited retirement accounts may be subject to specific tax rules. For example, non-spouse beneficiaries must withdraw all funds from an inherited IRA within ten years of the owner’s death. Let skilled lawyers help you navigate these rules to fit your retirement accounts into the overall estate plan while accounting for possible taxes.

Gifting

Gifting is another effective tool for minimizing estate taxes. The IRS allows you to give away up to $15,000 a year as gifts to as many people as you want without triggering gift tax. That means you can pass on your wealth to loved ones without worrying about tax implications. Besides, gifting enables you to see your loved ones enjoy your wealth while you’re still around.

A Skilled Estate Planning Lawyer Helping You Minimize Estate Taxes

Estate taxes are a concern for estate planners, and for valid reasons. They can take a considerable amount of your wealth, leaving less than you would have wanted for your loved ones. Fortunately, you can implement various estate planning strategies to minimize estate taxes, enabling you to pass on a considerable portion of your estate to your loved ones.

Experienced estate planning lawyers in Mesa can help you plan accordingly, utilizing the above strategies to minimize the tax impact. They can also review your estate plan periodically to ensure it reflects the changing estate planning laws. The Turner Law Firm, PLLC, is a full-service law firm in Arizona. Our legal team can help you deal with the tax burden when planning your estate. Call us at 623-253-8718 to schedule a case assessment.