2022 Texas Gift and Estate Tax Changes

Because there are proposed and implemented changes every year to the federal and state tax code, Texans should always be vigilant as to how these changes affect their gifting practices and their estate plans. In many cases, without the assistance of an estate planning attorney, these changes may seem minuscule and not even be noticed. However, newly passed laws may have a major impact on Texans and how they should implement their estate plan—plus changes they can make to take advantage of these changes. Below are some of the proposed changes that may occur in 2022 that Texans should be aware of and strategies to combat these changes.

Reduction to the Estate Tax Exemption

In the past year, there were proposals to reduce the estate tax exemption—meaning, lowering the amount after which individuals will need to pay a tax on their estate. The current amount is $12.06 million; however, this past year, there were proposals seeking to reduce the amount to $3.5 million per individual. If the amount were lowered this significantly in the upcoming year, many individuals who currently will not have to pay an estate tax will be forced to. However, even if this proposal is not adopted this year, the current estate tax law is set to reset in 2026 to $5 million—this is unlikely to be changed. Therefore, individuals should start planning and strategizing now if their estate value is around $5 million. Most of the strategies involve reducing the estate amount below the exemption limit—either by putting funds in irrevocable trusts or gifting it to loved ones or charity.

Create a Spousal Lifetime Access Trust

For married couples, one option to reduce their estate amount is to create a spousal lifetime access trust (SLAT). This is a type of trust where one spouse places funds in it for the benefit of the other spouse after they have passed away. The person managing the trust, the trustee, can then distribute the funds in the trust to the spouse for the purposes specified by the spouse who created the trust. The designated purposes may range broadly, from health expenses to education, to overall financial support.

This is one way for couples to reduce their estate value if they are worried about the decreasing estate tax exemption.

Because federal and state estate planning laws are constantly changing, individuals should have an experienced attorney that they can reach out to with questions and for advice on these matters. This can ease stress and potential problems if a law is passed, and the estate plan owner is unaware of the impact the law will have on their future.

Contact a Houston Estate Planning Attorney

If you or a loved one has questions about your estate plan, contact the Houston estate planning attorneys at McCulloch & Miller, PLLC. Our knowledgeable attorneys stay up to date on relevant changes to federal and state estate planning laws, so they can advise you on if any changes should be made to your plan—along with answering any questions you may have. Additionally, if you do not have an estate plan in place, our lawyers can assist you with this process. To schedule a consultation and to speak with one of our attorneys, give us a call today at 713-333-8900.

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