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In estate planning, you’ll leave assets to family members once you pass. To increase federal revenue, the government levies estate taxes on the transfer of property and assets. However, Hawaiians will only incur these taxes if the estate’s value exceeds $5.49 million (2019-2020). Consult the guide below for more information on estate taxes and how they can be minimized.

A Guide to Estate Taxes in Hawaii 

What’s included in the estate? 

The government uses a gross estate value. It’s the total value of an individual’s assets at the time of their death.

The executor will calculate the gross value by combining the value of owned real estate and personal property items, including vehicles, furniture, stocks, and bonds. Bank accounts, certificates of deposit, and retirement accounts are also included. 

Small business interests, including a sole proprietorship, a small corporation, and a limited liability company (LLC), are part of the estate. 

The proceeds from a life insurance policy are counted, as well. 

Must a tax return be filed? 

Estate PlanningIf Hawaii residents have a gross estate value exceeding $5.49 million, a tax return will need to be filed by the surviving family members. The federal government will also tax estates valued at $11.58 million or more. 

Non-residents who own property in Hawaii, like a home, vehicle, plane, or boat, may owe estate taxes and may need to file an estate tax return in Hawaii. 

What deductions are available?

Any property left to a surviving spouse will not have to pay any taxes, as part of the Marital Deduction. 

When estate planning, you may decide to leave property to a qualifying charity, which counts as a deduction. Mortgages, debts, and administration expenses also count as deductions. 

Large portions of the estate can be provided without family members incurring the significant taxes. A grantor retained annuity trust (GRAT) places your money into a trust that’s made to repay the estate (plus interest) over two years. Usually, the financial investment is a stock, which will typically rise. If it grows above the Treasury rate, the heir will receive their gains tax-free. But, if the stock doesn’t increase in value, the amount returns to the estate as if nothing happened, allowing them to break even.

While you’re still alive, you can gift inheritors up to $15,000 per year without having to report it to the internal revenue service (IRS). 

Is my same-sex spouse entitled to the Marital Deduction? 

As long as spouses are married at the time of death, they are entitled to the Marital Deduction regardless of sexual preference. Hawaii also recognizes civil unions and registered domestic partnerships, allowing the surviving spouse to receive the Marital Deduction. 

 

For over 30 years, the attorneys at Hawaii Convey in Honolulu have helped their clients through the estate planning and tax process. Together, you’ll develop a comprehensive and binding plan and minimize the payable taxes. They will also assist in administration and probate duties to relieve your loved ones of any undue stress. For more information on their services, visit their website. To schedule an appointment, call (808) 792-8777.

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