“Nothing in life is certain except death and taxes.”
This infamous quote from the late Benjamin Franklin is a
resounding reminder of how taxes are a persisting burden, even after death. To clarify this long-
standing issue, Brandon Butcher and Megan Hammann from Wealthquest held a seminar to
help retirees plan their estates and understand the tax implications of transferring wealth to their heirs.
Our Plans Today Define Our Future
In the seminar, Megan shared how “planning for death requires that we make choices today
about the life we want to live and the impact we want to have on the world.” She shared what
happens to your finances post-mortem. After death, your assets will be transferred to your
elected heirs, or your creditors will file to acquire the assets to settle any remaining debts.
Assets transfer through three ways: contract (beneficiaries), ownership (trust, titling), or will
(probate).
The Taxable Cost of Death
A common misconception about death and taxes is that it’s expensive and could leave your
beneficiaries with nothing. However, this is not always the case. Brandon clarified that only large
“gifts” are taxable. So, if you leave your heirs with an exorbitant monetary amount as a gift, you
are at risk for tax deductions. The 2023 annual gift exclusions are limited to $17,000 per
recipient before tax deductions apply. For a lifetime gift tax exemption, individual heirs are
limited to $12.92 million before tax deductions apply. These limits change every year,
depending on inflation and various factors.
How Can You Protect Your Inheritable Assets?
Although small inheritances aren’t subjected to taxes, they could still be consumed by debts
settled by creditors. Your creditors could file a claim on your estate and drain it dry, leaving
nothing for your heirs. To prevent this scenario, Brandon and Megan recommended
implementing estate plans to protect your assets from creditors and ensure that they are
transferred according to your wishes. Estate plans include setting up trusts, joint ownerships of
assets with rights of survivorship, or life insurance policies with beneficiaries. Creating a will can set
up the lengthy probate process and direct the distribution of assets.
It’s Never Too Early To Begin Tax Planning
Many people think that they’re either too early or too late for death planning or that they don’t
have large enough assets to warrant estate and tax planning. However, it’s never too early to
start planning for death and minimizing your taxes.
The earlier you begin, the more control you have over where your assets go after your death
and how they are protected. Even if you don’t feel like you have many assets to leave behind,
creating a will ensures that your last wishes are followed and that your loved ones are not
burdened with additional legal processes during their time of grief.
Death is inevitable. However, with proper planning and understanding of tax implications, you
can ensure that your legacy lives on and your loved ones are cared for.
Disclosure: This presentation and blog is being provided for informational purposes only. The ideas and opinions expressed on these slides and by our presentation speaker do not constitute legal, tax, or investment advice or a recommendation of any particular investment or strategy. Any information prepared from third-party sources is believed to be reliable, though its accuracy is not guaranteed. Opinions expressed in this presentation reflect subjective judgments of the speakers based on the conditions at the time of the creation of this presentation and are subject to change without notice. Anyone listening in person or at home should seek the input of their own financial, tax, and legal professionals before acting on any of the information provided. Past performance is not indicative of future results.
