Gift Tax Exemptions Under Texas Estate Planning Law

Estate planning is a critical process designed to designate and distribute a person’s assets upon their death, among other things. A Houston estate plan documents a person’s wishes if they become incapacitated or die and specifies who will effectuate the deceased’s wishes. These plans usually involve drafting wills and trusts, designating powers of attorneys and medical decision-makers, and addressing insurance issues and tax implications. It is crucial that individuals seek an attorney’s assistance to determine the current and predicted state of the law and how it may impact their beneficiaries.

What is a Gift Tax?

One area of estate planning that is currently under scrutiny is the federal gift tax. A gift tax is a tax on the transfer of wealth from one individual to another, when the gift is made during the gifter’s lifetime. In most cases, the person making the gift is responsible for paying the gift tax. The Internal Revenue Services (IRS) requires individuals to pay this tax if they give a gift to someone worth more than a specific amount. Currently, gifts made in excess of $15,000 reduce a person’s federal estate exemption when they die. For example, if a grandmother gifts her granddaughter $30,000 in a year, the first $15,000 is not taxable under the annual exclusion. However, after that, the remaining $15,000 counts against a person’s lifetime gift tax exemption and federal estate tax exemption.

The gift tax exemption will be increasing from $11.58 million to $11.7 million in the new year. If the amount stays the same, individuals transferring assets up to $11.7 million will be exempt from paying a substantial amount of taxes. However, the president-elect may change or revise the exemption with the consent of Congress. These potential changes may affect transfers in many different ways, and it is essential that individuals seek the assistance of an experienced attorney to discuss their options.

Despite potential changes, some gifts are not considered taxable. These exemptions include gifts to IRS-approved charities, gifts to spouses who are U.S. citizens, gifts to cover another’s education tuition, if it is paid directly to the institution, gifts covering another’s medical expenses, if it is paid directly to the medical provider, and a gift to a political organization. Those who are gifting more than the annual exclusion must file the appropriate gift tax return. However, the tax does not actually need to be paid unless they have exceeded the lifetime exclusion amount.

Seeking Assistance with Your Houston Estate Plan

If you or someone you love needs assistance understanding your Houston estate planning options, contact the attorneys at McCulloch & Miller, PLLC. We provide our clients with assistance and representation with an array of estate planning and elder law matters. The attorneys at our law firm have extensive experience representing clients during the probate process, helping them draft wills and trusts that protect the interests of their loved ones, and establishing plans for a family member’s care. Our team takes a comprehensive and individualized approach to each client to ensure their wishes are adequately reflected in their estate plans. Contact our office at 713-333-8900, to schedule a free consultation with an attorney at our law firm.

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