How to plan for estate taxes in Waco Texas
Estate taxes are different from and in addition to probate expenses, which you can avoid with a revocable living trust, and final income taxes, which must be paid on income you receive in the year you die. An estate tax is levied on the total value of a dead person’s money and property and is paid out of their assets before any distribution. The estate tax doesn’t affect many American taxpayers who aren’t in the top 2% of the nation’s wealthiest people. As of 2020, the federal estate tax applies only if the person’s estate is worth at least $11.58 million.
Federal estate taxes are expensive, with the top tax rate now at 40% in 2019. The estate tax must be paid in cash, usually within nine months after you die. Because few estates have the money, it has often been necessary to liquidate assets to pay these taxes. But, if you plan, you can reduce and even eliminate estate taxes.
How can I reduce or eliminate my estate taxes?
In the simplest terms, there are three ways:
There are three main ways to reduce or eliminate estate taxes.
1. If you are married, use both estate tax exemptions.
2. Remove assets from your estate before you die.
3. Buy life insurance to replace assets given to charity and pay any remaining estate taxes.
Some states also have an additional inheritance tax. Those states or jurisdictions do not include Texas. But they do include Connecticut, District of Columbia, Hawaii, Illinois, Maine, Massachusetts, Maryland, New York, Oregon, Minnesota, Rhode Island, Vermont, and Washington State.
Plan Now for Taxes on Estates
Estate and inheritance taxes are complex laws that frequently change. Most of us engage with them during a stressful and busy period of our lives. It’s wise to prepare for the inevitable by doing some homework in advance by contacting a Waco estate planning lawyer to discuss your options.