Speaker 1: Is there a simple way to avoid estate taxes? Well, the answer is yes. First of all, we'll talk about the federal tax level. In 2023, that's going to be $12,920,000. So simple way to avoid paying any federal estate tax is having an estate that's worth less than that. And for most people, we've avoided federal estate taxes. Let me focus in on Washington, because Washington is not nearly as generous as the federal level for what can pass without an estate tax. In Washington, our level is $2.193 million. So just like the federal estate tax, if your estate is worth less than that, you are not going to be paying any estate tax. However, if you have that amount or more than that, you should be concerned about the Washington estate tax. And yes, it can be very simple to avoid with some planning. Let's say you are married. How are you going to avoid that? Well, first of all, on the death of the first spouse, there is never an estate tax. But that's not necessarily good planning. Good planning is to take what is the assets of the deceased spouse and make sure they fund some sort of trust that captures the credit exclusion amount that the state of Washington allows, $2.193 million. That way, on the death of the second spouse, they don't have to pay an estate tax on what was the first spouse's share of their assets. So that is a very simple way for couples to avoid paying unnecessary Washington estate tax. Another way to avoid an estate tax, and now let's take a single person, because I just talked to you about how married persons can do it. So if you're a single person, and let's say your estate is worth $3 million, and you want it to pass to people as opposed to charities. There is a charitable deduction that's allowed if you want your money to go to charities. Let's say you want your $3 million estate, and let's say you've got three kids, and you want it to go equally to your three kids. What are you going to do? So as an estate planning and elder law attorney, what we would discuss is the fact that only $2.193 million can pass without Washington getting a share. What should we do? You are allowed to do gifting in your lifetime, and in Washington, we don't have a gift tax. So if you have $3 million, and let me just use round numbers, maybe we only want $2 million to pass under your estate. That means you need to gift out $1 million during your lifetime to your intended beneficiaries, your three children. We would talk with you about what are the best assets to gift. Money is a great asset to get, because it doesn't have a basis. That's a tax concept. If you gift anything that is like your stocks that you bought when they were worth $10, and now they're worth $10,000, that might not be a good asset to gift, because it's advantageous for your kids to inherit those types of assets and get a step-up or adjustment in tax basis. Same thing with real property. Typically, it's bought at a lower level. That's the cost basis. And if you give it away during your lifetime, then the gift recipient gets a carryover basis, as opposed to an adjusted basis, which is what goes with the asset if somebody inherits it. So cash is typically a really good asset to gift. Now, you might be thinking, but if I gift, don't I have to pay gift tax? I'm in the state of Washington. If I gift, aren't I only limited to $16,000, or some people even remember $10,000 per year? So in 2022, $16,000 is what we call the, well, that's the amount you can gift without having to even mention to the IRS that you gave away money. You can give away $16,000 to each of your children, all of their kids, and not even mention it to the IRS. So that's something that you can do annually without any reporting. But you aren't limited to only giving away that amount. If you give away more than that, you have to tell the IRS. So let's say, under my prior example, that you want to give away $1 million. Yes, you have to tell the IRS that you did that. How do you tell them? You file a gift tax return, but there's no gift tax imposed by the state of Washington or by the federal government. And with a $3 million estate, it does not cause you to have to pay an estate tax when you die either. So just very simple planning to avoid Washington's estate tax is gifting during your lifetime. However, be careful if you do that. Make sure you're working with an attorney, because depending on what your situation is, depending on what your needs are in the future, it might be a really bad idea for you to gift away your assets. I tell clients, don't gift away assets that you think you might need. As an estate planning and elder law attorney, we frequently help clients with preparing for long-term care, using government benefits. You've probably all heard about the five-year rule for Medicaid. So it's just something to be aware of. I'm not saying that gifting wouldn't be appropriate if you're that single person with $3 million. It may very well be the right thing to do. Before you give away your assets, get good legal advice from your elder law attorney.