Congress has released a tax reform plan to eliminate the federal estate tax, also known as the death tax. Many lawmakers have had this tax on their radars for years, and most consider it another form of double taxation. In Texas, estate planning may still be necessary even without the federal estate tax.
By eliminating the death tax, people will simplify their final plans, and there will be no need for complicated strategies to reduce taxes to the IRS. The most important reason for a shrewd estate plan is to fulfill its purpose and direct assets after death. Setting up estate trusts that safeguard the financial management of minor children and children from different marriages may help ease volatile situations.
The government does not control how states tax their residents. The District of Columbia and 14 other states still impose an estate tax, and six other states have inheritance taxes for monetary gifts. Doing away with the death tax does not mean that no tax planning is necessary. The trade-off will be that taxpayers will get a step-up in taxes of inherited assets.
If the White House and Congress eliminate the death tax, there will still be the need for a will to ensure the proper division of assets. Neglecting to have proper estate planning in Texas may cause financial and emotional hardship to beneficiaries. An attorney, who is dedicated to asset protection, inheritance and estate planning, may be able to answer questions and ensure that one's final requests are well expressed.
Source: fool.com, "3 Reasons You'll Still Need Estate Planning Even if the Death Tax Disappears", Dan Caplinger, Oct. 21, 2017