If you have been listening or watching any news recently, you have likely heard the term “estate tax” at least once and probably multiple times. The estate tax has become a major factor in the new congressional tax plan, with its proposed abolition. Regardless of how the estate tax is faring on capitol hill, it is still something that many if not all of us will be forced to think about at some point. The Davidson Law Group blog is here to explain what death taxes are and why having an estate planning attorney will help you throughout the process.
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What is the Estate Tax?
So far in this post, you have heard the phrase estate tax and death tax. Death taxes is a broader term for taxes levied upon one’s death. One of those death taxes is the estate tax, with the other being the inheritance tax. The terms death tax and estate tax are often seen as one and the same, however, because the inheritance tax is a state tax, only being imposed in six states. So, when you hear the term death tax, think of the estate tax.
The estate tax, as defined by the IRS, is “a tax on your right to transfer property at your death.” Here is the good news. The tax isn’t generally levied against the entire value of the estate, but only on the amount that exceeds the exemption threshold. As of 2017, the federal exemption sits at $5.49 million. So, if your estate is worth $5.49 million or less, it will be tax-free upon death. And even if you are above that number, the first $5.49 million will still be tax-free.
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So Why Do I Need an Estate Planning Attorney?
For many of you reading this, your estate won’t exceed $5.49 million and even if it does, it won’t be a substantial amount. However, when it comes to the entirety of one’s estate, $5.49 million isn’t as big of a number as we would think. If your estate exceeds that number, especially if it exceeds it by a substantial amount, hiring an estate planning attorney can help you maneuver estate taxes and help to minimize the effect they will have on loved ones.
There are several ways to help defer death taxes, and having an estate planning attorney will help you take advantage of them. One way is an element of the American Tax Relief Act of 2012 called “portability.” Portability essentially means that the spouse of the deceased can inherit the unused estate tax exemption and can then use it for a gift or estate tax purposes. This is a simple concept, but there are also a lot of details that go into taking advantage of this law. Consulting with an estate planning attorney can help ensure that your needs are taken care of
Davidson Law Group Can Help
Estate tax planning is stressful and tedious. For many of us, we won’t have to worry about it. For those of us that do, however, you could be looking at a sizeable chunk taken from your estate upon death. Let the estate planning attorneys at Davidson Law Group help. Contact us today in Fort Worth, Allen, or Tyler.