Houser Firm

Paying down an estate for wealth preservation

On Behalf of | Sep 21, 2022 | Estate Planning

Anyone who has considerable wealth should be concerned about how taxes will impact what they’re able to pass down to their loved ones. Finding ways to minimize the taxes the estate is responsible for is part of creating your estate. This also ensures that your heirs and beneficiaries receive as much as possible. 

While Texas doesn’t have an estate tax, people have to think about the federal tax. This tax applies to estates with a value of $12.06 million or more, as of 2022. The federal tax rate is anywhere from 12 to 40%, depending on the value of the estate over the exclusion threshold. 

How can you pay down an estate?

You can pay down the value of the estate through gifting, but you must use caution with this. You’re only allowed to give up to $16,000 each year per recipient. This means that you can give your daughter, son-in-law, and every grandchild you have each $16,000. If you’re married, you can gift $16,000 per person and your spouse can also gift $16,000 to the same person. 

Certain trusts can also shelter assets from being taxed. These are always irrevocable trusts, and they must be set up in a precise manner. The good news about these trusts is that they can bypass the probate process and provide the recipients with privacy that’s often not possible with other estate planning methods. 

Anyone who’s trying to preserve their wealth to pass down to future generations must ensure they consider tax liabilities of the estate. These can eat away at what’s passed down. Working with someone familiar with wealth preservation is beneficial.