Leaving Houston? Consider State Estate Taxes

Sold signWhat if your estate is worth less than $5 million, even when counting life insurance policies, the value of your home and your assets? We bet you that you think that means you don't need to pay estate taxes, and consequently that you don't need an estate plan.

That is a mistake, because there are many other reasons to have an estate plan besides the estate tax. It is also a mistake because many states have estate taxes of their own that require careful planning to navigate. With proper planning, these state estate taxes can almost always be avoided.

A recent Forbes article took on this topic in "Three Surefire Moves To Beat State Death Taxes," which recommend the follow tactics:

  • Move – Not every state has an estate tax, so you can move to a state without one. However, you need to be careful about appearing to have merely changed your address to avoid the estate tax.  You need to make the move complete, and it is best to cut all ties with your former state.
  • Bypass Trusts – These are trusts created at the time of death of one spouse. The trust is usually funded with assets up to the state's estate tax limit. The rest of the estate goes to the surviving spouse. When that spouse passes away, the estate tax bill will be less. These are complex instruments and you will need an estate planning attorney to assist you.
  • Gifting – If you give assets away now, they will not be part of your estate and subject to the estate tax. However, make sure that you only do this after speaking to an attorney and accountant so that you do not face unnecessary tax problems.

Proper estate tax planning, whether at the federal or the state level, requires qualified estate planning assistance. This cannot be overemphasized.

For additional information on estate planning in Houston, please click here to visit my website.

Reference: Forbes (October 16, 2015) "Three Surefire Moves To Beat State Death Taxes."


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