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What You Need to Know About Estate Tax Planning

Whenever one is involved in financial planning, they must take into consideration all tax implications. As far as estates are concerned, it's important to understand what types of taxes are relevant and which ones are not. Currently, the state of Texas does not impose a state estate tax, an inheritance tax or any other "death tax" on the estates of people who die while domiciled in Texas or on the estates of individuals who live in other states but who die owning real property (including minerals) in Texas.

Since state tax isn't an issue, what draws attention is the federal estate tax. Federal estate tax is a tax on your right to transfer property upon your death. The total of all of the items you own is considered your "gross estate" and this may include cash and securities, real estate, personal belongings, insurance, trusts, annuities, and business interests among other assets.

If the idea of estate tax concerns you, it's important to note that the majority of estates do not require the filing of an estate tax return. A filing of an estate tax return is only required for those estates with combined gross assets and prior taxable gifts exceeding $5,250,000 as of 2013. There are deductions available to reduce estate tax, some of which include:

  • Marital deduction
  • Charitable deduction
  • Mortgages and debt
  • Estate administration expenses
  • Losses incurred during estate administration

If you want to keep as much money and property in the family as possible instead of handing it over to Uncle Sam, you may want to consider some effective advanced tax planning techniques that will enable you to do this. There are several options available to you, some of which include gifting assets directly to family members or nonprofit organizations; however, this option only works well for those who have accumulated a significant amount of wealth and aren't worried about running out of funds.

For married couples, the establishing of certain basic trusts can significantly reduce or eliminate federal estate taxes against their estates. For example, the use of an irrevocable life insurance trust for individuals or married couples can hold and own life insurance while removing the life insurance proceeds from the taxable estate. The life insurance proceeds can provide immediate cash to pay expenses and taxes.

Other advanced estate planning techniques include Family Limited Liability Companies, Spousal Lifetime Trusts, Charitable Remainder Trusts and a Qualified Personal Trust, all of which are designed to reduce estate taxes and allow you to maintain an income stream while you're still alive.

If you are interested in learning more about the advantages of estate tax planning, we urge you to contact a Houston estate planning attorney from Shepherd & Associates for a free phone consultation at (713) 993-7791 today.

Shepherd & Associates - Houston Estate Planning Lawyer
Located at 14090 Southwest Freeway, Suite 300
Sugar Land, TX 77478
Phone: (713) 993-7791

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

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