Can a will reduce estate taxes?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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A will alone usually does not have much effect on estate taxes. There are several kinds of taxes that might apply to an estate or inheritance. There is the federal estate tax — at the rate of 40%– which applies to estates over $11,400,000 per person in 2019.  The tax-free amount is adjusted yearly for inflation.

There are also now estate taxes at the state level, and you have to know your state’s requirements and the size of estate a state tax will apply to. A few states also have inheritance tax. This is usually applied to all the property in an estate, no matter what size the estate is, and also to all real property located in the state, even if the will is being probated somewhere else.

The estate planning techniques used to avoid estate taxes usually involve transferring property to trusts so that the final estate is too small to pay estate taxes. A will doesn’t help reduce the size of the estate, so it doesn’t reduce estate taxes. A will generally only saves on the expenses of probate (the legal process for transferring title of property from the deceased to the beneficiaries), because probating an estate with a will is usually less expensive than probating an estate without a will. A will might also save money by using state statutory language that will allow your estate to be exempted from probate.

If you have questions about estate taxes, you should consult an attorney and make sure your estate plan is updated as the laws change.

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