estate tax michigan

When a person dies, the federal government may subject their assets to an estate tax depending on whether they exceed certain thresholds. For more information on the estate tax in Michigan, please keep reading, then contact an experienced Washtenaw County estate planning attorney today. Some questions you may have include:

How does the estate tax work in Michigan?

For tax purposes, federal tax collectors from the Internal Revenue Service assess these levies based on the estate’s fair market value, rather than the amount the deceased originally paid for their assets. Anything in the estate that the decedent bequeaths to a surviving spouse does not count toward the total amount of the estate and does not become subject to estate tax. The federal threshold is $12.06 million. If the fair market value of the estate does not exceed that amount, it will not become subject to estate taxes.

What is the estate tax rate in Michigan?

The Internal Revenue Service employs a tax rate based on the following taxable amounts:

  • $0 to $10,000: 18 percent of the taxable amount
  • $10,001 to $20,000: $1,800 plus 20 percent of the excess over $10,000
  • $20,001 to $40,000: $3,800 plus 22 percent of the excess over $20,000
  • $40,001 to $ $60,000: $8,200 plus 24 percent of the excess over $40,000
  • $60,001 to $80,000: $13,000 plus 26 percent of the excess over $60,000
  • $80,001 to $100,000: $18,200 plus 28 percent of the excess over $80,000
  • $100,001 to $150,000: $23,800 plus 30 percent of the excess over $100,000
  • $150,001 to $250,000: $38,800 plus 32 percent of the excess over $150,000
  • $250,001 to $500,000: $70,800 plus 34 percent of the excess over $250,000
  • $500,001 to $750,000: $155,800 plus 37 percent of the excess over $500,000
  • $750,001 to $1,000,000: $248,300 plus 39 percent of the excess over $750,000
  • $1,000,001 and higher: $345,800 plus 40 percent of the excess over $1,000,000

How do you minimize estate taxes in Michigan?

To minimize estate taxes, you need to keep the planning simple and the total amount of the estate below the threshold. That is easy for most families. Setting up trusts that facilitate the transfer of wealth can help ease the tax burden for those with estates and inheritances above the threshold. You can use an intentionally defective grantor trust, a type of irrevocable trust that allows a trustor to isolate certain trust assets so as to separate income tax from estate tax treatment on those assets, in order to reduce your estate tax exposure. Additionally, if you own a life insurance policy, your survivors can use the proceeds of said policy to reduce the estate taxes. One way to prevent an insurance policy from being lumped into one’s estate is to transfer ownership to another person or entity, including the beneficiary.

Speak with a member of Collis, Griffor and Hendra, P.C. if you have any further questions.

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