There are numerous concerns that those with large estates will need to address that individuals with fewer assets don’t need to consider. Disputes are more likely to arise when an estate has more valuable property, and creditors and other claimants can seemingly come out of the woodwork during probate proceedings.
One of the most pressing concerns is the possibility of estate taxes diminishing a legacy when someone has millions of dollars of property in their name. The more personal wealth you have accumulated throughout your life, the more could potentially be at risk after your death.
Do those living in Texas and thinking about their legacies need to worry about estate taxes?
Texas will not tax your estate
One of the benefits of living in Texas is that the state does not levy an estate tax. However, just because there will not be any risk of a state-level tax does not mean your estate will be fully exempt from taxation.
Regardless of what state you live in at the time of your death, a large estate could trigger estate tax obligations. The federal government expects people with large estates to pay estate taxes regardless of where they live when they die. Any estate worth more than $12,060,000 is potentially subject to taxes.
The more the estate exceeds that threshold amount, the higher the tax rate the estate may have to pay. Those who do not do any advance planning could end up losing up to 40% of their estate to federal taxes after their death.
There are numerous strategies for reducing estate tax liability
Individuals in Texas can employ multiple different approaches if they hope to minimize their federal estate tax obligations.
Some people will make strategic gifts during their life, allowing them to witness family members enjoying their inheritance. Annual gifts can also reduce the chance of triggering a gift tax. Moving major assets like investment holdings, real estate and businesses into a trust can be another way to keep your most valuable assets from contributing to the total value of your estate.
Learning more about the possible liabilities for the legacy you leave when you die can help you protect your assets during the estate planning process.