Dealing with the Internal Revenue Service (IRS) is one thing no one in the United States enjoys. Because of its constantly changing policy and a website that the IRS themselves tell consumers not to rely on, it is easy to understand why the IRS is problematic for the average person to interact with. One of the primary reasons taxpayers dislike doing business with the IRS is because the organization is notorious for withholding valuable information from the tax paying population. When something as stressful as managing the estate of a loved one is combined with the IRS, things get complicated. Fortunately, learning more about these three things the IRS does not want you to know can make handling federal estate taxes easier to manage.

Most Estates Do Not Owe Taxes

Estate taxes are often portrayed as a mandatory part of settling the estate of a loved one. In reality, approximately 99% of estates do not owe any estate tax. Typically, only the extremely wealthy in the United States owe estate taxes because of their estates. As of 2017 $5.49 million per person is exempt meaning only a small group (roughly 0.2%) of wealthy heirs are truly impacted by estate taxes. Not realizing that their estate may not even face taxes, some adults procrastinate on filing or dealing with the taxes at all out of a misplaced fear that they will be heavily penalized.

Family Businesses are Not Heavily Taxed

Transferring a business that is part of an estate can turn into a complicated process during a time when a family is already under a lot of pressure. Though a family that owns a small business or farm is more likely to owe estate taxes, they are not as heavily taxed as one might expect. Only approximately 1% of all small businesses or family-owned farms are required to pay estate taxes.  The taxes that are paid are typically less than 6% of the business or farm’s total value. Current estate tax rules are extremely generous with more people and businesses paying penalties due to late or inaccurate filing rather than because of the estate’s actual value.

There are Loopholes to Help Estates Avoid Taxes

If you or someone close to you is left a large estate that does not qualify for tax exemptions, that does not mean that you will have to pay an excessive estate tax. There are several ways an estate owner can pass tax-free-money on to his or her heirs. These tax loopholes often take advantage of grantor retained annuity trusts to pass large amounts of money to beneficiaries while greatly reducing their tax liability. Loopholes used by the wealthy are not always practical or feasible for those with smaller estates, but they are something the IRS does not want a suddenly wealthy heir to know about.

Talk to an Attorney

Discussing your estate plan or tax concerns with a skilled trust and estate lawyer is the best way to protect your heirs. An attorney is able to help you plan for future tax considerations in advance so that your grieving beneficiaries have less to be concerned about. MMZ Law realizes how costly estate tax mistakes can be and are ready to discuss your estate plan with you in detail so that you can make the best possible decision. Contact us today to schedule a consultation at our conveniently located Claremont, California office.

*We service Elder Law through Medi-Cal Asset Protection Planning



341 W. 1st St. Suite 100
Claremont, CA 91711

MARIVEL M. ZIALCITA is the founder of MMZ LAW, A Professional Corporation, where she practices in the areas of Elder Law – Medi-Cal Planning Asset Protection, Trust & Estate, Special Needs, Conservatorship, Trust Administration, & Probate. Ms. Zialcita is a frequent speaker on trust and estate matters and holds memberships in the State Bar of California, Trust and Estate Section, The San Bernardino County Bar Association, Wealth Counsel and Elder Counsel. She currently assists in the pro bono legal services program at the James L. Brulte Senior Center in Rancho Cucamonga, California. She is based in Claremont but assists clients throughout Southern California.

This information is educational information only and not legal advice.