If you live in Wisconsin, you are in luck. The State of Wisconsin does not impose any estate or inheritance tax on the estates of deceased residents. There may be, however, a few points you may need to keep in mind for estate planning purposes. For instance, did you know that the federal estate tax still applies to Wisconsin residents, even though the state does not have one? Also, if you live in Wisconsin but own property in another state, that property may be subject to that state’s estate tax. Let us review three estate tax tips for Wisconsin residents to consider when creating an estate plan.
1. Find Out About the Federal Estate Tax Exemption. Currently, very few Wisconsin residents need to worry about federal estate tax because the exemption is so high at approximately $11.7 million per individual person or $23.4 million for a married couple. These limits, however, expire at the end of 2025 and may revert to their prior, lower levels at that time. They could also be made lower at any time by alternative Congressional legislation. As of March 2021, there is a bill before Congress that proposes to lower the federal exemption to $3.5 million per individual or $7 million for a married couple. If you have an estate that approaches these lower proposed limits, you might consider creating an irrevocable trust or making annual gifts to ensure you stay below the level where the federal estate tax might kick in.
2. Creating an Irrevocable Trust. You may decide that an irrevocable trust is the right way to exclude your assets from being subject to estate tax. If you are approaching a point where you feel the federal estate tax may become a concern, you can put whatever assets you need into a trust so that you avoid going above the federal limits. In addition, putting property into a trust may be a good way to handle any out-of-state properties you own that might be subject to estate tax in another state. Remember, however, that once you decide to put money or property into an irrevocable trust, you may not be able to get it back.
3. Make Annual Gifts. Annual gifts to your future heirs may be another good way to ensure your estate does not exceed the federal estate tax limits. Currently, an individual can gift up to $15,000 per year and a married couple up to $30,000 per year to any individual recipient without either the giver or the recipient incurring any gift or estate tax. If you make this type of gift to children or grandchildren on an annual basis, you could remove quite a bit from your estate.
For assistance in navigating estate tax issues, please contact our office to schedule an appointment.