While planning for the distribution of your assets after your passing, your primary goal is ensuring that your loved ones are well taken care of. However, the imposition of estate taxes can significantly diminish the inheritance your beneficiaries receive, potentially undermining your intentions. Therefore, it’s crucial to understand the strategies available to mitigate their impact. Please continue reading as we explore how you can minimize tax liabilities on your estate and how a knowledgeable Washtenaw County Estate Planning Attorney can help you navigate this intricate process.
Does Michigan Impose Estate Taxes?
First and foremost, it’s important to understand that some states have an estate tax while others have an inheritance tax, and others have neither. However, there is a federal estate tax that applies to all states. If you meet or exceed the filing threshold, you will be responsible for paying these taxes. If your estate falls below the threshold, you are exempt.
Michigan does not impose estate taxes. This means regardless of the size of your estate, you won’t owe money to the state. You can pass your assets to your heirs without worrying about state-level taxes. Nevertheless, despite no estate taxes in the Wolverine State, you may owe taxes to the federal government, depending on the size of your estate.
Generally, the exception for federal estate tax is $13.99 million in 2025, up from $13.61 million in 2024. If a Michigan estate exceeds this threshold, the top federal tax is 40%. This means if your estate is valued over this amount you will have taxes against your assets. It’s important to note that estate and inheritance taxes are different. Estate taxes are imposed on the estate itself, whereas inheritance taxes are levied against the beneficiary of the asset.
You should also keep in mind that federal estate taxes take the market value of your assets into account. For instance, if you buy a home that decreases in value over time, its current value will be used to calculate the appropriate tax amount.
How Can I Mitigate These Taxes?
When navigating plans for your future, it’s advisable to consult an experienced Washtenaw County estate planning attorney who can help you avoid or reduce estate taxes. With careful planning, you may circumvent the federal estate tax by establishing an Irrevocable Trust. By transferring assets out of your estate into the name of the Trust, they are no longer considered part of your estate and therefore cannot be taxed. Additionally, with proper estate planning, your beneficiaries can receive the assets immediately upon your passing.
Another way you can shelter your assets from estate taxes is through charitable giving. If you decide to leave your entire estate to charity, it won’t be subject to estate taxes. This is because these funds will be used to make a meaningful impact and gifts made to charities are typically deductible for tax purposes.
Finally, you can delay these taxes by performing marital transfers. You can leave your spouse the entirety of your estate with no tax implications. However, this won’t eliminate the taxes on your estate but will delay them until your spouse’s passing.
At Collis, Griffor, & Hendra, we are prepared to help you set up your estate to avoid unnecessary tax consequences. Connect with our firm today for advice and skilled representation.