Disclaimer: We are not tax professionals; this article should not be construed as tax advice. It is for information purposes only. Always consult with your tax and financial advisors for tax advice.
Are you wondering how taxes can affect your estate plan in the state of Georgia? Or perhaps you’re wondering what the best moves are to reduce your tax liability. Today’s article addresses some of these issues, and things to consider, and offers some ideas to limit tax liability.
First, let’s unpack the three taxes you should be aware of and how each tax can affect your estate plan in the state of Georgia.
Estate Tax
Estate tax is tax owed by your estate upon your death. This tax is often commonly referred to as a “death tax”. Meaning, at the time of your death your estate is taxed based on its net value. This tax is paid out of the estate by your Trustee or Administrator.
Estate tax is often confused with inheritance tax, but there are differences. As mentioned above, estate tax is paid by the estate and is based on the net value of the entire estate.
The 2024 estate tax exemption is $13.61 million. Keep in mind, this exemption could be dramatically reduced in 2026 if the government does not intervene.
We’ll discuss inheritance tax below.
Inheritance Tax
Inheritance tax, also commonly referred to as “death tax”, is tax owed by your beneficiaries because of their inheritance. This tax is based on the net value of the inheritance, not the entire estate.
An inheritance is any asset, be it tangible property, real estate, money, etc., left to a beneficiary after your death. So, if you leave an inheritance to a beneficiary, they are responsible to pay the inheritance tax out of that inheritance—even if your estate was already assessed an estate tax.
The approximate inheritance tax exemption for 2024 is $14.19 million.
Gift Tax
Gift tax is a little different, as these taxes are assessed when a gift is given during your lifetime. So, if you were to give a large sum of money or a piece of real estate, a gift tax may be assessed by the federal government—depending on the net value of the gift. This tax is paid by you, the donor.
This gift tax exemption for 2024 is $18,000 per recipient.
Now that we know what each type of tax is, let’s discuss how each can affect your estate plan and estate in Georgia.
Effect of Estate & Inheritance Tax in Georgia
The state of Georgia does not have an estate or inheritance tax. Meaning, you can give any amount (until you hit the federal government exemption limit) and be exempt from state tax. As we mentioned above, the federal government does have a tax limit.
The 2024 estate tax exemption is $13.61 million. This means, in 2024 the estate can be valued at and distribute inheritances up to this amount without triggering estate or inheritance taxes in Georgia.
However, if your estate’s net value exceeds this amount, you will have to pay estate tax. And careful consideration must be taken to potentially avoid triggering inheritance taxes for your beneficiaries. Again, as we noted above, the approximate inheritance tax exemption for 2024 is $14.19 million. Meaning, even if your estate value triggers estate taxes, if you keep your beneficiary’s inheritance under this threshold, they can avoid paying inheritance tax.
Effect of Estate & Inheritance Tax in Other States
It is important to note that other states do have these taxes in place and your beneficiaries living in those states will likely have tax liability— in some cases, even if the estate and inheritance net values are below the exemption limits.
The states that have an estate tax are: Connecticut, Illinois, Oregon, Maine, Maryland, Massachusetts, Minnesota, New York, Rhode Island, Vermont, Washington, and Washington DC.
The states that impose an inheritance tax are: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
If you have beneficiaries residing in these states it is important to discuss that with your estate planning attorney to determine the best course of action to limit tax liability as much as possible.
Gift Tax in Georgia and Beyond
The state of Georgia does not impose a gift tax. However, the federal government does when any gift is valued at $18,000 or above, per recipient for 2024. Once that threshold is reached, you, the donor, are required to file a tax return and eventually pay a tax on the gift.
Keep in mind that if your beneficiaries reside in another state, you may be required to pay a gift tax on gifts below the federal limit. Currently, only Connecticut and Minnesota have a gift tax.
At Siedentopf Law we understand that you want to protect your legacy for future generations and limit the tax liability personally and for those future generations. We are here to help guide you to the best estate planning tools to protect that legacy, limit tax liability and monies spent in the probate process, and secure your wealth for future generations.
Call us at (404) 736-6066 or visit our website to schedule a consultation.
