There are specific federal exemptions under current law that allow most people to avoid paying taxes on their wealth when they pass away. The current federal exemption limit generally excludes most of Michigan’s population, as it is set at $12.06 million for individuals and $24.12 million for married couples in 2022. However, there are some wealthy families that still must consider making changes to their estate when the assured day comes that they move on from this life. These individuals must plan ahead to keep as money as possible within the family or their friends, and it can include modifying their financial holdings beforehand to protect them against the government. Not just anyone qualifies for a federal exemption.
Moving assets for maximum protection
There are financial tools that can be used to keep estate tax collectors from seizing financial holdings at passing. The ultimate goal is actually avoiding the probate process completely. This is usually accomplished easiest by setting up irrevocable trusts or a foundation that can be managed according to decedent instructions after the fact.
Alternate asset protection
Another option for some asset holders in avoiding estate and inheritance tax is early transference of wealth to eventual inheritors. This move takes the assets out of the hands of the primary owner and transfers them before passing as property of the inheritor. This not only applies to cash holdings, but also real estate and other personal property such as high-value vehicles.
Many times it is also better to make these changes sooner rather than later for individuals who know it will be an issue later. These steps also help in the event of an untimely death or an emergency health situation that ultimately results in death of the testator.
