Many people entering into the estate planning process in Texas do so using common tools such as wills and trusts. Each of these options has benefits for beneficiaries and heirs. In some cases, however, trusts may be a better option. This is the case when a person creating an estate plan seeks to avoid some or all of the federal estate tax.
In Texas and elsewhere, assets that are distributed through a will must go through the probate process. This requires a court hearing and can mean an extended period of time before heirs are able to collect what they have inherited. Assets that go through probate may also be subject to the federal estate tax, depending on the size of the estate.
However, when a trust is used, beneficiaries may be able to receive their distribution without it being subject to the estate tax. This is the case if a GRAT or IDGT is used. However, some of the benefits of these types of trusts may be changing. The laws applying to trusts are being reviewed as Congress tackles the federal budget pan.
It can benefit a person in Texas to gain an understanding of the applicable laws as they work to create an estate plan that benefits their heirs and beneficiaries. Even if a plan already exists, it may be a good idea to keep an eye on any potential changes to how taxes apply to assets in trusts. The good news is that there is information available to any who care to learn about the tools available to create effective estate planning strategies.
Source: LifeHealthPro.com, “Budget proposal targets estate planning tools,” Robert Bloink and William H. Byrnes, April 8, 2013