With so many changes to estate taxes and how they are structured, it may be difficult for many Texas residents to keep it all straight. That is where estate planning comes in. By working with a dedicated professional, it may be possible to create a plan that maximizes the size of the estate while minimizing the impact of taxes.
In that vein, readers may be interested to hear of possible changes to estate taxes at the end of this year. For example, under current law, there is an estate tax exclusion of up to $5 million. Any amount inherited beyond this figure is taxed at a rate of up to 35 percent. However, in 2013, the exclusion will drop to $1 million if Congress takes no action, and amounts beyond this will be taxed at a rate of up to 55 percent.
While even an estate tax exclusion of $1 million may seem large, many Texas residents may be surprised at how quickly they can reach that figure. The size of one's estate includes not only bank and stock accounts, but also personal property, a residence and any other real property that one owns. Failing to distribute this property in a tax-efficient manner could cause the heirs of the estate to have to pay more in taxes than they should.
But that is not the only provision that may change. Additionally, the lifetime gift-tax exclusion may drop from $5 million for individuals to just $1 million in 2013. With so many regulations set to change, it is important to take the time to conduct estate planning on a regular basis.
Source: Minuteman News Center, "What you need to know about estate tax laws," Feb. 29, 2012