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What are death taxes? That is a very common question that I get in my Estate Planning practice. Death taxes are commonly also called the Estate Tax. This is the only tax that happens only when you die. There are other taxes that might occur when you die like the Generation Skipping Transfer Tax, but that tax can also apply during life. So the death tax is generally the estate tax.
The tax can apply to everything you own at death. This also includes the death benefit of life insurance policies and anything that you gave away within three years of your death. The death tax doesn’t affect many people at all.
The Federal Estate tax only starts to apply once you get over roughly $11 million in assets. That doesn’t affect most families. The Minnesota Estate tax will soon only affect those with over $3 million in assets. That could affect more people. Especially if you die just before retirement. The value of retirement accounts, a nearly paid off home, and life insurance proceeds can creep up into that amount easily.
There are many things that you can do to plan for the tax. You can also take steps to make your life insurance not count. If you want to know more about this, then schedule a planning session with me and I’ll gladly go over your situation.