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How Can an Estate Planning Attorney Help You Manage Inheritance Taxes
There are over 990,000 households in Texas, and estate-related disputes aren’t uncommon in the state. However, there’s more to estate planning than deciding who your assets should go to on your demise. Estate planning is often one of the most critical aspects of financial management.
Proper planning must start with assessing your current assets, which requires a detailed statement of your property, assets, debts, and living expenses. From there, you can try calculating estate vs inheritance taxes to determine how much money will be available for taxes after you’re gone.
Understand the Legal Aspects
The good news about estate planning is that Texas does not currently have an inheritance tax. However, while residents are not liable for any state-imposed death taxes, certain federal estate taxes are still to worry about.
Texas’s stance on state-level taxation for the dead clarifies that you can’t avoid inheritance tax. Remember this when drawing up a will and detailed living trust package. This is because if your will is not written correctly, it could lead to an increased chance of your property being taxed through probate.
Understand the Probate System
Probate is the court-supervised process of settling a deceased person’s outstanding debts and distributing their property to those who inherit it.
While probate can be an expensive process, Texas offers a homestead exemption that protects certain assets from going through probate – including the family home.
How Can a Texas Estate Planning Attorney Help
If you are worth more than $1 million, you need to plan how your heirs will pay any outstanding inheritance taxes. If you’ve already named an executor in your will, the first step is to determine if they are willing and able to serve in this capacity. Generally, there should be no court involvement in this process.
Will Preparation and Drafting
You’ll also want to determine if the assets you own will pass on under a will or through intestacy (in the absence of a will). This is because not all assets are transferable to your heirs by law.
The assets may include property you own with someone else, life insurance benefits, or retirement accounts.
Manage Inheritance Taxes: Will and Trust Packages
Next, you should consult with a Texas estate planning attorney to create an up-to-date will and trust package. These packages will include strategies for minimizing federal estate taxation, as well as protecting your family’s assets from creditors and predators (such as divorcees).
At the very least, if your spouse is still alive when you pass away, there will be a need to create a marital trust or reserve an existing one. If you haven’t established this type of trust and your spouse dies before you do, the resulting inheritance (which would otherwise go to heirs via your will) instead goes through probate court.
Determine Who Should be Included in Your Will
Keep in mind that there are specific restrictions on who can receive a portion of your estate. For example, if you leave money to your underage children, you should consider acquiring a trustee to help them manage the funds until they reach adulthood.
In conclusion, Texas is one of the few states that do not have an inheritance tax. Nonetheless, be sure to consult with a Texas attorney when calculating estate vs inheritance taxes to avoid potential pitfalls related to estate taxes and probate.