In this article, discover:
- How while Georgia has no state estate tax, federal estate taxes can still apply to larger estates
- Three main strategies to simplify wealth transfer to your heirs
- The importance of regular estate plan reviews
Georgia residents enjoy a significant advantage when it comes to estate taxes, as Georgia repealed its state estate tax in 20141. However, larger estates can still be subject to federal estate taxes. Here we will explore strategies for minimizing tax burdens when transferring different types of assets to your heirs.
Top Takeaways:
- Georgia has no state estate tax.
- The federal estate tax applies only above the exemption threshold.
As of 2024, the federal estate tax lifetime exemption is $13.61 million per individual2. This means that estates valued below this threshold won’t incur federal estate taxes. Married couples can effectively double this amount through proper planning, protecting up to $27.22 million from federal estate taxes. (Please note: these exemption amounts are set to change for 2025 and 2026. The current federal estate tax exemption is scheduled to sunset in 20253, potentially reducing to approximately half its current level. Please contact Moore’s Wealth Management for more information.)
With these points in mind, we can delve into recommendations for wealth transfer planning.
Universal Planning Considerations
Regardless of asset type, consider these strategies:
Living Trust Benefits
A revocable living trust4 can help avoid probate and provide privacy while maintaining control during your lifetime. While it doesn’t directly reduce taxes, it can simplify administration and reduce overall costs because it makes it easier to distribute your wealth to your beneficiaries upon your death.
Our three examples below are but a few of the estate planning options you can consider. Moore’s Wealth Management can help you with more tax, retirement, and estate planning strategies that are right for you. Please contact us to set up your complimentary retirement strategy session so you can learn more about estate planning aligned to your goals.
Top Strategies for Transferring Real Estate, Securities, and Cash
1: Minimizing Taxes on Real Estate Transfers
Real estate often represents a major part of an estate’s value. There are a few things Georgians can do to keep their taxes as low as possible when they leave property to their heirs:
a) Qualified Personal Residence Trust (QPRT)
This trust5 lets you give your main home or a vacation home to someone else while still being able to live there for a certain amount of time. You reduce your estate by the home’s current value, and you also keep any future appreciation from affecting your estate. For gift tax purposes now, the property’s value is lowered by the amount of your retained interest. This could reduce gift taxes significantly. There are many facets to a QPRT and it may not be right for everyone. Moore’s Wealth Management can review the pros and cons with you to see if this trust would fit your situation.
b) Life Estate
Creating a life estate6 allows you to maintain control of the property during your lifetime while ensuring it passes directly to beneficiaries upon your death. This arrangement can help avoid probate and may provide tax advantages. It also can protect your life estate remainderman from Medicaid recovery after you die. Ask Moore’s Wealth Management about life estates and see if they are right for your financial goals.
c) 1031 Exchange Planning
If you own investment properties, a 1031 exchange7 can help you avoid capital gains taxes if you buy another property of equal or more value during a specified timeframe. Doing so defers your capital gains tax liability now, and if you die still holding that replacement property, then your heirs benefit from deferred capital gains tax liability. That’s because they’ll inherit the property at its fair market value at the time of your death (stepped up tax basis). Moore’s Wealth Management can further explain details and specific timelines and properties that can qualify for 1031 Exchange Planning.
2: Stocks and Securities Transfer Strategies
Managing investment portfolios to reduce heir taxes is crucial. These are important areas where our wealth management advisors can help you:
a) Step-Up in Basis
One of the most valuable tax benefits for inherited stocks and securities is the step-up in basis at death8 (as we mentioned in our real estate example). This means your heirs’ cost basis becomes the fair market value at your date of death, potentially eliminating significant capital gains tax liability.
b) Strategic Gifting
In 2024, the annual gifting exclusion amount is $18,000. In 2025, it will increase to $19,0009. Note that this annual exclusion is per gift recipient. So, you could give that amount to multiple recipients and not have to pay gift tax.
For highly appreciated securities, consider:
- Annual gifting up to the exclusion amount
- Direct transfers to charitable remainder trusts
c) Investment Account Structuring
Consider maintaining separate accounts for different heirs rather than a single large portfolio. This can facilitate easier transfers and potentially more tax-efficient distributions.
3: Cash and Liquid Assets
While cash might seem like the simplest asset to transfer, strategic planning can still yield tax benefits, such as:
a) Irrevocable Life Insurance Trust (ILIT)
Life insurance proceeds are generally income tax-free but may be subject to estate tax if you own the policy. An ILIT10 can help remove life insurance proceeds from your taxable estate while providing liquid funds to heirs.
b) 529 College Savings Plans
Georgia offers state tax benefits for contributions to 529 plans, and these can be excellent vehicles for transferring wealth to younger generations while potentially reducing your taxable estate. Georgia taxpayers can deduct up to $8,000 per beneficiary per year for joint filers and $4,000 per beneficiary individually via Georgia’s Path2College 529 Plans11. Moore’s Wealth Management can discuss all of the details of these plans with you, including aggregate per beneficiary contribution limits. Ask us about details on Georgia’s Path2College 529 Plans.
c) Systematic Gifting Program
Implement a structured gifting program12 that takes advantage of annual exclusions and lifetime exemptions. This can include:
- Direct payments of educational expenses
- Direct payments of medical expenses
- Annual exclusion gifts to multiple beneficiaries
d) Family Limited Partnership (FLP)
This structure can help manage various assets by transferring wealth to the partnership13. Partnership assets are taxed at a lower than market value rate. Moore’s Wealth Management can explain your options for this strategy and if it’s right for you.
Plan Your Estate with Confidence: Moore’s Wealth Management
Although Georgia does not have any state estate taxes, it is still important to plan carefully to make sure your heirs get the best possible results and minimize your federal tax exposure. The best approach often combines multiple strategies tailored to your specific situation and goals.
Regular Review
Estate planning isn’t a one-time event. Regular reviews are essential to ensure your plan remains optimal as:
- Tax laws change
- Asset values fluctuate
- Family circumstances evolve
- New planning opportunities emerge
Act Now to Balance Your Estate Planning Objectives
Estate planning should go beyond tax efficiency. Family dynamics, charitable goals, and legacy goals should guide your planning. Moore’s Wealth Management can help ensure your strategy:
- Maximizes available exemptions
- Coordinates with your overall financial plan
- Addresses both tax and non-tax objectives
- Remains compliant with current laws
Our experienced wealth management professionals can help you balance your estate planning objectives while implementing tax-efficient transfer strategies. Contact Moore’s Wealth Management today for a personalized consultation.
This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.
All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.
Advisory Services Network, LLC does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state laws are complex and constantly changing. You should always consult your own legal or tax professional for information concerning your individual situation.
Sources:
1 “Estate Tax – FAQ“. State of Georgia Department of Revenue. (No date of publication listed.) Retrieved December 11, 2024.
2 “Sunset of the Federal Estate Tax Exemption“. University of Vermont Foundation. (No date of publication listed.) Retrieved December 11, 2024.
3 “Estate and Gift Tax FAQs“. IRS.gov. (No date of publication listed.) Retrieved December 11, 2024.
4 Michael, Jonathan W. and Singer, Stacy E. (No date of publication listed.) ”How Does a Revocable Trust Avoid Probate?” ACTEC, The American College of Trust and Estate Counsel. Retrieved December 11, 2024.
5 FindLaw Staff | Legally reviewed by Aisha Success, Esq. (Last reviewed July 04, 2024). ”Qualified Personal Residence Trusts FAQ“. FindLaw.com. Retrieved December 11, 2024.
6 Investopedia Staff | Reviewed by Marguerita Cheng (Updated May 31, 2024). ”What Is a Life Estate?” Investopedia.com. Retrieved December 11, 2024.
7 “Exchanges Under Code Section 1031“. American Bar Association. (No date of publication listed.) Retrieved December 11, 2024.
8 Baker, Logan. (November 2024, exact date not listed). ”Estate Planning: How Does the Basis Step-Up Rule Work?” Kiplinger.com. Retrieved December 11, 2024.
9 “IRS releases tax inflation adjustments for tax year 2025“. IRS.gov. (October 22, 2024.) Retrieved December 11, 2024.
10 Delfino, Devon. (September 27, 2023). ”What is an irrevocable life insurance trust?” USAToday.com. Retrieved December 11, 2024.
11 “What can a Path2College 529 Plan do for me?” The State of Georgia, Path2College 529 Plan. (No date of publication listed.) Retrieved December 11, 2024.
12 Walrack, Jessica. Reviewed by Tanza Loudenback, CFP, Edited by Barri Segal. (April 8, 2024). ”Smart Ways to Gift Money to Children” Money.USNews.com. Retrieved December 11, 2024.
13 Written by CFI Team. (No date of publication listed.) ”Family Limited Partnership (FLP)” Corporate Finance Institute. Retrieved December 11, 2024.
