Estate Planning For Peace Of Mind

How to prepare for future estate tax changes in Texas

On Behalf of | Feb 20, 2024 | Estate Planning |

While Texas currently boasts no inheritance taxes, the future remains uncertain. With potential changes looming, it’s a great idea to be proactive in estate planning. Here are some tips for preparing for future estate tax changes in Texas.

Understand the current laws regarding taxes

The federal estate tax exemption currently sits at a generous $13.61 million per individual, or $27.22 million for married couples, for the tax year of 2024. In contrast, Texas has no state estate tax at all. However, it’s important to stay informed about potential changes to avoid estate planning errors that would make your estate vulnerable to hefty tax bills.

Leverage existing exemptions

You can maximize the current high federal exemption by making lifetime gifts to loved ones by using the annual gift tax exclusion of $18,000 per person per year to gradually transfer assets without incurring gift taxes. You can also take advantage of the unlimited marital deduction, allowing spouses to transfer assets to one another tax-free.

Consider establishing a trust

By transferring ownership of assets to a trust, you remove them from your taxable estate and potentially reduce future estate taxes. They also provide flexibility in terms of distribution and can protect assets from potential creditors.

Some of the fundamental ones to consider are living trusts, irrevocable life insurance trusts and charitable remainder trusts. If you are married, a spousal lifetime access trust (SLAT) could also be a useful tool in reducing your taxable estate, especially if the federal estate tax exemption decreases in the future.

Review your beneficiary designations

Life insurance policies, retirement accounts and bank accounts with payable-on-death (POD) or transfer-on-death (TOD) designations bypass probate. However, if it isn’t clear who you want to receive these assets after your death, they may end up in court as part of your estate.

Explore charitable giving

Donations to qualified charities can significantly reduce your taxable estate in Texas. They also provide a way to support causes that are important to you. Consider establishing a charitable trust or foundation or simply leaving a portion of your estate to charity in your will.

At the end of the day, strictly following the estate planning process will give you peace of mind, knowing that your assets and loved ones are in safe hands after your passing. It also minimizes the potential for conflicts, delays and unnecessary expenses in distributing your assets.