Houston Estate Planning and Elder Law Attorney Blog
Many worry that their estate will be left with significant taxes when they pass. Fortunately, Texas is one of 38 states that do not have an estate tax. However, residents may still be subject to federal estate tax laws. Other states’ inheritance laws may apply to a Texas resident. Thus, it is advisable that those who live in Texas consult with an experienced trust and estate planning lawyer.
What is an Estate Tax
An estate tax, commonly referred to as the “death tax,” is a tax applied on the estate of a deceased person before their money passes on to their beneficiaries or heirs. In contrast, the government takes an inheritance tax after money or items have been passed on to the deceased’s heirs.
Congress debated many changes to the federal estate and gift tax laws. While most of the proposals would have changed the amount a person could gift during their lifetime, the Build Back Better Act (H.R. 5376) did not present significant modifications to the estate and gift tax exclusion amount.
Federal Estate Tax
Those who pass in Texas will not owe any estate tax to the state. However, these individuals may owe money to the federal government. In 2022, the federal estate tax applies to estates worth $12.06 million. Thus, if an estate surpasses the applicable value, it may be subject to a federal estate tax. Moreover, the federal estate tax is portable for married couples. In other words, if the couple takes the appropriate legal steps, they will not have to pay a tax on up to $24.12 million when both spouses pass. However, it is critical that couples consult with an attorney to ensure that they do not waive their rights to these benefits.
Gifting Assets During the Lifetime
Texans who want to avoid lengthy and complicated legal proceedings for their heirs and beneficiaries should consult with an attorney to discuss estate planning tips. Gifting during a lifetime is a prim example of avoiding hefty taxation after death. There are various ways to gift assets tax-free, such as:
The annual gift tax exclusion
Lifetime gift and estate tax exemption
Direct payments to educational and medical providers on behalf of a close friend or family member
In most cases, it is advisable to gift assets while alive rather than after death. In addition to allowing loved ones to enjoy benefits immediately, it will enable the beneficiary to experience the full extent of the gift.
Current Gift Tax Exclusion
As of 2022, a person can gift any number of people up to $16,000 each in a single year without incurring a tax. In most cases, the recipient does not have to report the gift for tax purposes, except if it comes from a foreign source. The amount increases to $32,000 for spouses who are “splitting” gifts. However, gifts exceeding this statutory amount must be reported.
Contact a Houston Estate Planning Lawyer
If you are considering your estate planning options, contact the experienced attorneys at McCulloch Miller, PLLC. The lawyers at our firm provide peace of mind for Houston families in all their estate planning needs. In addition to individual estate planning, our firm handles estate planning for business, owners, Medicaid crisis planning, special needs planning, wills, and trusts. Contact our office at 713-597-7176 to discuss your elder law, trusts, and estate planning issues with a renowned attorney on our team.