Tap To Call
Trust and Estates Attorneys

Taxes in DC Estate Planning

Taxes play a huge role in the estate planning process in the District of Columbia. Those interested in creating an estate must be aware of the various taxing systems that apply once a person passes. Having a Washington, DC estate planning lawyer by your side guiding you through the process will be hugely helpful. For more information regarding planning estates, call today and schedule a free initial consultation.

Important Considerations Regarding Estate Taxes Planning an Estate

It’s important for a person to review the assets of their estate plan to determine if they are subject to the DC estate tax or the federal estate tax. An estate planning attorney can help a client assess whether there is enough liquidity built into his or her estate plan to provide for the payment of any taxes or even administrative expenses, if necessary. If possible, an attorney can identify ways to mitigate a person’s estate tax liability or minimize their exposure to DC and federal estate taxes.

Mitigating Impact of DC Estate Taxes

There are a number of different options available to assist mitigating estate taxes. Some of these options include taking full advantage of the first spouse to die’s estate tax exemption, taking full use of available deductions including charitable giving or gifting during a person’s lifetime, and freezing assets at their current basis during a client’s lifetime.

Although there are a number of options available, it is important to have an estate evaluate whether your estate is at risk for estate tax liability and provide you with options that are the best fit for your assets and family dynamic.

Factoring In Non-Estate Taxes

Generally, when someone passes away, there are three taxing systems that may apply. They include the DC and/or federal estate tax, inheritance tax, and income tax. The estate planner may work with the person’s accountant and financial adviser to develop the plan to provide for income or to reduce exposure to income tax liability.

Although DC has no inheritance tax for decedents dying after 1987, there may be applicable inheritance taxes if the decedent owned real estate or other property in multiple jurisdictions.

Finally, it is projected that for the 2016 tax year, the DC estate tax exemption will be $1 Million. Recent legislation has been passed to increase the estate tax exemption to $2 Million, but it is anticipated that the increase will not occur until 2017. Besides the DC estate tax, individuals residing in the District of Columbia may also be subject to federal estate tax.

Length of Estate Planning Process

Estate planning takes at least two in-person meetings between the attorney and client. There is generally a meeting to discuss the goals of the client and the possible options available to meet those goals. After the initial meeting, drafts are exchanged between the attorney and the client. When the documents are finalized, the client returns to the attorney’s office to execute his or her documents.

Even after the documents are completed, an attorney continues to advise clients at their request to review their estate plan at least every three to five years. Documents should also be reviewed sooner if there has been a birth or a death in the family, significant increase or decrease in wealth, purchase of a new home, move to another jurisdiction, or a marriage or divorce.

An attorney may also consult with clients after the documents are completed to coordinate their beneficiary designations with their overall estate plan, or to assist with the funding of any trust they created.

How an Attorney Can Help

A person’s documents and overall estate planning can be changed as long as they have the requisite capacity to do so. As a person’s family grows and changes, so should their documents. They are not meant to be stagnant; the most effective documents are those that have been reviewed often.

For example, when a person experiences a major life change, they may want to check with their estate planning attorney to make sure that their documents do not need to be adjusted or revised to incorporate that change in to the overall estate plan.