Estate Planning and Taxes: 4 Popular Questions

Apr 20, 2021Family Office, Tax Planning0 comments

estate planning and taxes

Estate Planning and Taxes: 4 Popular Questions

Estate planning and taxes – two inevitable facts of life that most of us are often reluctant to face. While taxes are a necessary part of your whole adult life, laying out the plans for your estate isn’t something that creeps in until later in life. As such, when the time does come for you to seriously think about planning your estate, it’s only natural to encounter quite a few questions! To help you stay ahead of the curve, our tax advisors are here to address some of your questions!

The 2 Sides of Estate Planning and Taxes

When it comes to tax planning, there are two different angles to consider, those leaving behind their legacy and inheritance and their heirs. With that in mind, we will be providing some insight into tax questions from both perspectives.


The Decedent

If you are at the point in your life when you’re thinking about your legacy, estate planning is a big part of that conversation. We’ll provide some tips to help you perfect the legacy you want to leave behind for your loved ones.


The Recipient

While coming into your inheritance is a blessing, the tax planning that comes with it can feel like a curse – we will offer some tax hacks to help you reduce those taxes and keep more of what you’ve been left by your loved ones.

Estate Planning and Taxes

As the Decedent

1. What is the Estate Tax?

Before diving into the particulars of estate planning, it’s worthwhile to address the most obvious and commonly-asked question: what exactly is the estate tax? Simply put, the federal estate tax is a fee placed on the transfer of your property to your heirs at the time of your death. While the federal estate tax is usually quite high, it’s only imposed if your estate is above a specific threshold. The federal estate tax applies to you, no matter where you live, unlike the state-level estate taxes. Luckily, the additional state-level estate tax is not imposed in the great state of Texas, which is a reason why many choose to retire here!

2. What Needs to Be In My Estate Plan?

As a rule of thumb, a basic estate plan should include a will, a living will, durable power of attorney, medical power of attorney, and designated executor. While these are the essentials, there are plenty of other components that should be carefully put into place with the help of a trusted financial advisor, life insurance specialist, and accountant. Furthermore, if you also have trusts, there will be some additional tax implications to take into account when forming your strategy with  your CPA. Ultimately, it takes a village to ensure that what you leave behind for your loved ones isn’t drained by taxes at the federal and state level!

Estate Planning and Taxes

As the Recipient

3. Am I an Heir or Beneficiary?

Now that we’ve tackled some questions you may have during the estate planning process, we will address your questions as the person on the receiving end of that inheritance. To start, you may be wondering if you are considered the heir or beneficiary, and what the difference is! While a beneficiary is the person named to receive something when someone dies, an heir receives assets under state law through probate court, when a person dies without designating beneficiaries in a will. Considering the hassle and fees involved in probate court, it’s generally much better to be a beneficiary!

4. How Will My Inheritance Be Taxed?

Unlike the federal estate tax, which is levied by the federal government on the estate of the person who has passed, inheritance taxes are a type of state tax on money or property you receive as the person inheriting those assets. Just like the state-wide estate tax, only a few states levy inheritance taxes, including Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. That said, some assets your inherit will be taxable, and you’ll need to make sure to claim them on your text return. This is where the help of a trusted tax advisor can really come in handy!

Texas Estate Planning and Taxes

While federal estate taxes are nation-wide, a lot of your estate and tax planning opportunities depend on your state’s tax policies. That’s why it’s smart to plan with a tax advisor who is well-versed in Texas tax laws! 

At Lifetime Tax Advisors, we are proud Texans who know our state and federal tax laws like the back of our hands! From helping our clients map out their legacy to making sure they preserve as much as is legally possible from the pockets of the IRS, we have the tools, knowledge, and experience to help you with your estate planning and taxes! If you’re ready to secure a brighter future for your loved ones,  give us a call at (972) 771-6707 or visit our website today!

Leave Your Estate Planning and Taxes to Us

Whatever your tax needs are, we have the solutions to meet them! Take your next step toward becoming a Lifetime Tax client by clicking the “Learn More” button below.


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