Today we’ll be looking into estate tax and how it affects your estate plan. Specifically, we are taking a closer look at estate tax in the state of Georgia.
What Is Estate Tax?
Estate tax is also commonly referred to as “death tax”. Estate tax is assessed on and paid by your estate after your death—if your estate is valued above the exemption limits. As it stands right now, the federal exemption—the amount at which estate tax kicks in—is $13.61 million. This is adjusted each year for inflation or recession. This is tax owed and paid by your estate when your estate’s net value exceeds the federal exemption limit. As noted above, in 2024 the limit is $13.61 million.
Estate tax is not to be confused with inheritance tax or gift tax, although inheritance tax is often also referred to as a death tax. We’ll get into those taxes and the differences a little later in this article.
Georgia Does Not Have an Estate Tax
The state of Georgia does not have a state Estate Tax. This means, there is no additional tax liability assessed by the state of Georgia. The Federal Government assesses their Estate Tax and nothing is owed to the state. Keep in mind that if your estate consists of properties or assets owned in other states or countries, you may be liable for state estate taxes (or that country’s estate taxes).
The states that have an estate tax are: Connecticut, Illinois, Oregon, Maine, Maryland, Massachusetts, Minnesota, New York, Rhode Island, Vermont, Washington, and Washington DC.
Federal Estate Tax
As noted above, the Federal Estate Tax will not affect your estate unless it is valued at or above $13.61 million, in 2024. If your estate is valued above this amount, the tax rate is steep. When you reach or exceed that $13.61 million threshold, the tax rate is approximately 40%. So, if your estate is valued above this threshold it’s important to make plans to protect your estate and minimize tax liability. This will allow you to leave the largest financial legacy to future generations. As you can imagine, if your estate is valued at or above the federal exemption proper estate planning is essential because the current tax rate is so high.
Common Confusion Regarding Estate Tax
Often Estate Tax, Inheritance Tax, and Gift Tax are confused. And it’s easy to understand why. Especially as it pertains to the differences between two “death taxes”: Estate Tax and Inheritance Tax. Here’s a quick breakdown of each of you.
Estate Tax: these are taxes paid by your estate after your death when the value of your estate exceeds the exemption allowed by the federal and/or state government. As noted above, Georgia does not have an estate tax and the federal estate tax exemption is $13.61 million. States with an estate tax are Connecticut, Illinois, Oregon, Maine, Maryland, Massachusetts, Minnesota, New York, Rhode Island, Vermont, Washington, and Washington DC.
Inheritance Tax: these are taxes paid by the beneficiary receiving an inheritance which exceeds the exemption allowed by the federal and/or state government. Georgia does not have an inheritance tax and the federal inheritance tax exemption is $14.19 million. The states that impose an inheritance tax are Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
Gift Tax: these are taxes paid by the donor on gifts given during the donor’s lifetime. The state of Georgia does not have a gift tax and the federal gift tax exemption is $18,000 per recipient. Only Connecticut and Minnesota have a gift tax.
Changes To Estate Tax Law
As noted above, the current tax exemption is $13.61 million in 2024. It’s important to note that in 2017 a temporary law called the Tax Cuts and Jobs Act (TCJA) was put in place to offer relief to estate taxes. At that time, it took the estate tax threshold from around $6 million for an individual and, more or less, doubled it. This is why the current estate tax exemptions allow for estates to shelter $13+ million dollars before taxation.
Unfortunately, the TCJA is only temporary. Unless the government intervenes—making the law permanent or extending the timeline on the temporary law– this exemption could be dramatically reduced in 2026. Essentially, if the government does nothing, this tax will sunset back to its standard rates as they stood before the temporary law was put into place in 2017. Meaning, if your estate is valued at approximately $6 million or more, anything above that $6 million exemption level will be steeply taxed when the law sunsets in 2026.
Ways to Avoid Federal Estate Tax
You may be wondering how all of this affects you. And that is a great question. If your estate is valued anywhere near that $6 million sunset exemption limit, it’s important to work closely with a skilled team to ensure as much of your estate as possible is shielded from tax liability. One of the best ways to protect your assets is the use of a Trust or multiple Trusts. There are many different types of Trusts and we would love to help you select the right tools to protect your assets. You’ve worked hard for what you have, and we would love to help you protect it for many generations to come.
We loved helping people protect their legacies for years to come. Call us at (404) 736-6066 or visit our website to schedule a consultation.
