When most people think about estate planning, they imagine trusts, big estates, or complicated legal documents. But even if your assets are not enormous, taxes can still take a big bite out of what you leave behind.
In Wisconsin, estate planning is more than deciding who gets what. This is about minimizing tax exposure, protecting retirement accounts, handling capital gains, and making sure your family doesn’t get hit with unexpected income tax bills after you’re gone.
Let’s look at what Wisconsin residents should know about estate planning and taxes.
Does Wisconsin Have an Estate Tax?
There is good news for those living in the state. Wisconsin does not have a state estate tax. That means your estate will not owe a separate Wisconsin estate tax when you pass away. While that is a relief, it does not mean you don’t have to worry about taxes. You may be on the hook for federal taxes.
The federal government does have an estate tax. However, it only applies to very large estates.
Currently, the federal exemption is in the multi-million-dollar range per individual. For most Wisconsin families, the federal estate tax is not an immediate concern.
However, if your estate is growing or includes valuable real estate, a business, or large investments, you may want to plan ahead instead of assuming you will be below the threshold.
You May Still Need to Think About Income Taxes
Income tax can still come into play with your estate plan. Traditional IRAs, 401(k)s, and other tax-deferred retirement accounts may be subject to income tax when beneficiaries withdraw funds.
That means your heirs may face tax consequences depending on how those accounts are structured and distributed. If you are looking to lessen any tax impact, there are options such as beneficiary designations and trust structures.
What About Capital Gains and Step-Up in Basis?
When someone inherits appreciated property, such as real estate or stock, the tax basis is adjusted to the fair market value at the date of death.
For many Wisconsin families, this can reduce capital gains taxes if the asset is sold at a later date. However, without proper planning and documentation, heirs can run into issues about valuations and tax treatment.
This is one reason you need estate planning. You can make sure those assets transfer correctly and avoid tax burdens for your family.
Planning for Family Farms and Businesses
For many Wisconsin families, wealth is tied up in farmland, equipment, or a closely held business, not in liquid assets. That can create tax challenges when someone passes away.
Federal estate tax may apply if the total value of land, buildings, equipment, and business interests exceeds the exemption amount. If a tax bill comes due within months of death and there is not enough cash on hand, heirs may be forced to sell land or business assets to cover it.
Income taxes are also part of the equation. If a farm or business continues operating during estate administration, it may generate taxable income that must be reported.
With a solid estate plan, you can address liquidity concerns, structure ownership transitions, and minimize unnecessary tax consequences. This is a great option for families who want to preserve land or business operations across generations.
Wisconsin Residents Need to Think About Their Estate Plan and Taxes
Estate planning is not just for the ultra-wealthy. This is for homeowners, business owners, farmers, parents, and anyone who wants to protect the people they care about.
A well-structured estate plan can minimize income tax complications, protect against avoidable capital gains issues, and make sure assets transfer efficiently.
If you want confidence that your estate plan is structured properly, Collins Law Firm can assist. We work with Wisconsin families to develop estate plans designed to protect assets, address tax exposure, and provide lasting peace of mind. Schedule a consultation today.