Maybe you ran a ranch for most of your life and have hundreds of acres of land and thousands of animals that you will leave to a loved one. Perhaps you have valuable real estate holdings, substantial personal investments or a business.
Being able to leave highly valuable property to your loved ones can be a source of comfort and security for those people as they grieve after you die and a source of pride for you in your golden years. Unfortunately, the more valuable your property, the more likely it is that your family and loved ones won’t receive the full value of those assets unless you plan carefully.
Estate taxes impact how much you leave behind and can drastically diminish the value of your estate if you don’t plan for them ahead of time.
Texans only have to worry about federal estate taxes
There is a noteworthy number of states that apply their own, secondary estate tax to the estates of residents when they die. Thankfully, Texas is not among them.
Those in Texas creating an estate plan or last will do not need to worry about the state levying an estate tax against their property or an inheritance tax against their loved ones after they receive assets from the estate. However, the federal estate tax still applies even if the state does not collect its own tax.
Is your estate at risk of federal estate taxes?
There is a threshold for estate taxes. If the total value of the property that you intend to pass to your family and loved ones is less than $11,580,000, your estate likely is not currently subject to taxation. However, if the value of your estate is close to that amount or already passed it, you may need to start planning to reduce the taxable value of your estate.
The more property you pass on over that cutoff amount, the higher the amount of taxes you pay. The top tax bracket for estate taxes is a staggering 40%. Changing the ownership status of your property or moving it into a trust are two ways that you can potentially bypass the state taxes or at least reduce the taxable value of your estate.
Talking with an attorney familiar with estate planning and taxes in Texas can help you devise a strategy that will maximize the legacy you leave for the people you love.