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estate taxes

Q&A: Bequests to household employees can trigger fights, taxes

August 18, 2025 By Liz Weston Leave a Comment

Dear Liz: Please consider mentioning employers who haven’t forgotten long-time employees in their estate planning. Caregivers and domestic workers may work for families, the elderly or seriously ill patients for decades. When there is a death, the estate or family members rarely remember these workers who feel their effort must have meant very little not to have been acknowledged in some small way. I did hear about an employer who put away $10,000 a year in a savings account for an hourly paid employee who retired after 30 years of service. By the way, the employee never asked for anything. She was just grateful to have been of service for so many years.

Answer: You’re right that a bequest could be a meaningful acknowledgment of a longtime domestic employee’s faithful service. Such bequests also can trigger huge family fights, accusations of undue influence and court challenges that drag on for years.

The size of the bequest, the size of the estate and the contentiousness of the family are all factors that need to be considered. Also keep in mind that while most bequests aren’t taxable, bequests from an employer often are since the IRS views such transfers as compensation. Anyone contemplating including an employee in their will would be wise to consult an estate planning attorney as well as a tax pro.

Filed Under: Estate planning, Q&A Tagged With: bequests to caregivers, bequests to household employees, domestic workers, estate disputes, estate taxes, household employees

Q&A: Giving your money away? The IRS wants to know about it.

December 16, 2024 By Liz Weston

Dear Liz: You recently wrote that “the only givers who have to pay taxes are those who have given away millions in their lifetimes.” I tend to be generous with my offspring who are the beneficiaries of my trust. For example, I gave a down payment on a house to my son last year. Because of long-held rental property investments, my estate is probably close to the $13-million lifetime limit. Since lifetimes don’t expire until we die, and I plan to live to 120, does this mean that until I give away over $13 million in cash, I don’t have to report or pay taxes in any given year on gifts?

Answer: Not quite.

You have to file a gift tax return to report any gift over the annual limit, which in 2024 is $18,000 per recipient. Gifts don’t have to be in cash to be reportable. If you’d given your son a house instead of a down payment, you’d still need to file a gift tax return.

Reportable gifts are deducted from your lifetime gift and estate exemption, which is $13,610,000. Once you deplete that exemption, you would have to pay gift taxes on any gifts above the annual limits. Even if you don’t deplete the exemption, reportable gifts will reduce the amount of your estate that can avoid estate taxes. You’d be wise to get advice from an estate planning attorney about how to handle gifts.

Filed Under: Estate planning, Q&A, Taxes Tagged With: estate tax exemption, estate taxes, gift tax, gift tax exemption

Friday’s need-to-know money news

March 5, 2021 By Liz Weston

Today’s top story: How to handle debt in an unequal recovery. Also in the news: 6 ways to save at the pump, worrying about the right thing with estate taxes, and 4 in 10 Americans are struggling financially one year after the pandemic began.

How to Handle Debt in an Unequal Recovery
Navigating the K-shaped economy.

Put the Cap on Gas Prices: 6 Ways to Save at the Pump
Here’s how experts recommend managing your fuel budget with oil prices on the rise.

Worry About the Right Thing With Estate Taxes
Few people pay estate or gift taxes, but many benefit from an inheritance tax break that may be axed.

4 in 10 Americans struggling financially, one year after coronavirus struck the U.S.
How things look a year later.

Filed Under: Liz's Blog Tagged With: debt, economy, estate taxes, gas prices, K-shaped recovery, pandemic

Thursday’s need-to-know money news

March 4, 2021 By Liz Weston

Today’s top story: Worrying about the right thing with estate taxes. Also in the news: 3 ways to get socially distanced tax prep this year, 5 sneaky things COVID-19 might do to your tax bill, and new rules for self-employed and gig workers applying for PPP loans.

Worry About the Right Thing With Estate Taxes
Few people pay estate or gift taxes, but many benefit from an inheritance tax break that may be axed.

3 Ways to Get Socially Distanced Tax Prep This Year
Secure portals, drop-off services, and virtual visits can help you work with a tax preparer from a safe distance.

5 Sneaky Things COVID-19 Might Do to Your Tax Bill
Advice from the tax pros.

New rules for self-employed and gig workers applying for PPP loans
What you need to know

Filed Under: Liz's Blog Tagged With: COVID-19 taxes, estate taxes, PPP rules, self-employed, tax prep

Worry about the right thing with estate taxes

March 2, 2021 By Liz Weston

Death and taxes may be the only certainties in life, but death taxes are only a remote possibility for most people. The vast majority of Americans won’t ever have or give away enough to owe estate or gift taxes.

Far more people could be affected if a tax break that benefits heirs is eliminated. While campaigning for president, Joe Biden proposed doing away with something called the “step-up in basis” that allows people to minimize or avoid capital gains taxes on inherited assets. But no legislation has been proposed yet, and such a change could have a tough time getting approved by a divided Congress.

In my latest for the Associated Press, why it’s time to think about the hard stuff and plan ahead.

Filed Under: Liz's Blog Tagged With: capital gains, Estate Planning, estate taxes, step-up basis

Q&A: Avoiding estate taxes

January 30, 2017 By Liz Weston

Dear Liz: You recently answered a question about what a wealthy couple could do to reduce future estate taxes, and you mentioned the annual exclusion. They also could pay education and medical expenses for anyone, and there’s no annual limit.

Answer: Absolutely — and the couple’s estate planning attorney almost certainly would have informed them of this option.

The original letter came from one of the couple’s children, asking what their parents could do to reduce future estate taxes, in addition to the irrevocable trust that already had been set up. The reader lamented that the estate was bigger than the current exemption limits (now $10.98 million for a married couple) and so could incur estate taxes.

My answer was that the couple’s attorney would have told them of other options. One of those options is to use the annual exclusion of $14,000 per recipient to gift tens if not hundreds of thousands of dollars out of their estate. If the couple chooses not to use available options, and instead lets the estate incur the taxes, there’s not much the heirs can do about it.

Filed Under: Estate planning, Q&A, Taxes Tagged With: estate taxes, q&a

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