What are Death Taxes?

Death Taxes

In addition to the expense and delay of probate, your family may also be liable for death taxes. There are two types of death taxes: the federal estate tax and the state estate/inheritance tax. State inheritance taxes vary dramatically from state to state. The federal estate tax is one of the largest taxes a family may ever have to pay. It's a tax on your right to transfer property to others at your death. Currently, the federal estate tax rate is 35% of every dollar in your taxable estate in excess of $5,250,000.

 Does Texas have a State Death Tax?

   No.  Die as a Texan.  It can be a good deal.

Do all estates pay Federal Estate Taxes?

No. The federal government has given every person in the United States an exemption for estate tax purposes.

Is there an Estate Tax Deduction for married people?

Yes. In addition to the personal exemption that everyone gets, the federal government has exempted all transfers of wealth between a husband and wife. This is called the Unlimited Marital Deduction and it means that regardless of the size of your estate there will be no federal estate taxes levied when the first spouse dies and leaves the estate to the surviving spouse.

Keep in mind, however, that this may be merely a postponement of tax. There may be a tax on the estate when, at the second death, it passes to the children or other beneficiaries.

What if you have a small estate; do you need to worry about estate planning?

Yes. While an estate under the exemption is free from federal estate taxes, you will probably not avoid a living probate if you become disabled or a death probate when you die. Remember, probate and federal estate taxes have nothing to do with each other. Estate taxes are paid to the federal government for the right to transfer property at your death. Probate fees and costs are paid to the probate court, attorneys and the personal representatives of your estate for supervising the administration of your estate and distributing assets to your beneficiaries.

How can I create a Living Trust?

The first step is to make an appointment for a complimentary, no obligation meeting with one of our estate planning attorneys. You should be prepared to discuss the following issues:

  • How your assets are to be distributed after your death, and
  • The names of the people you want to manage your assets if you become mentally disabled and after your death.

IRS 230 Circular Disclosure:  To the extent that the content of this site contains an opinion on one or more Federal tax issues, such opinion was not written to be used and cannot be used for the purpose of avoiding tax penalties imposed by the Internal Revenue Code or for the preparation of a tax return.  If you desire a formal opinion on a particular tax matter for the purpose of filing a return or avoiding the imposition of any tax penalties, please contact us to discuss the further Treasury requirements that must be met and whether it is possible to meet those requirements under the circumstances, as well as the anticipated time and fees involved.  The foregoing disclosure is required pursuant to IRS Circular 230 (2005), which sets forth best practices for tax advisors.

The Greening Law Firm, P.C. serves clients in Austin, Georgetown, Bee Cave, Lakeway, Lake Travis, Round Rock, Cedar Park, Pflugerville, Temple, Hutto, Leander, Manor, Dripping Springs, Blanco, Wimberley, San Marcos, Bastrop, Elgin, Westlake and Central Texas.