It’s no secret that April is a month when most Texans are taking care of taxes. But when it comes to estate planning, there are many different forms of tax that affect you and your family. Your exposure to these taxes depends on how you set up your estate plan. The following are a few of the more relevant tax aspects of estate planning:
• Estate Tax. The federal estate tax does not affect as many families as it used to. Historically, estates valued at more than $600,000 were taxed at rates of up to 55% of the value of the estate at the time of death. For deaths occurring in 2016, $5.45 million of assets are exempt from estate tax at the time of death. And with the new portability provisions and appropriate elections, it’s fairly easy for married couples to leave $10.9 million of assets to their heirs, free of federal estate tax.
• Income Tax. People these days are forming trusts to prevent painful circumstances for their family in the future. There are several reasons why individuals and couples are forming trusts.
• To avoid the court-supervised probate process
• To avoid confiscation of assets by the nursing home
• To avoid government intrusion into family and financial affairs
Most of these trusts are established in a way that your income taxes are not affected by the formation of these trusts. These trusts are often called, for tax purposes, Grantor Trusts, which means that the trust is ignored for tax purposes. The person who set up the trust must pay income tax on the income that the trust assets produce.
• Capital Gains Tax. Many families unknowingly incur large sums of unnecessary capital gains tax because the donate appreciated assets to their family members or children prior to their death, ensuring a “carry-over” basis, and losing the “step-up” in basis that occurs when your heirs inherit appreciated assets. Since the estate tax affects so few, it’s often better to keep the assets in your “taxable estate” and ensure the step-up in basis to your heirs when they inherit those assets after your death.
• Property tax. All estate planning and lifetime transfers should not be made without considering the property tax aspects of those transfers.
Don’t work with just anyone to design and execute an estate plan. You need to engage in a relationship with an estate planning attorney that works solely in that area and has a thorough, working knowledge of the trust code, the Medicaid Eligibility Manual, the probate code, inheritance law, and the applicable state and federal tax codes. Many people that come into my office have worked with attorneys in the past that have helped in one area but were detrimental in another. Don’t let that happen to you and your loved ones!
The secret of successful estate planning is with Skeen Law. Our personable and professional service, along with our straightforward approach in handling client’s estates for a lifetime are valuable in developing and maintaining customer satisfaction. Experience it for yourself by registering for a free informational seminar at www.skeenlawfirm.com or simply contact me to schedule an appointment at (210)202-1141.
Leave a Reply