Worldly possessions handed down to heirs may be subject to an estate tax, also known as the death tax. Some states and the federal government charge this tax based on the value of a property after an owner’s death. It does not apply to every estate, and most never end up paying it. In Texas, an estate may be exempt from paying any death tax depending on its value.
The death tax is a tax applied to a person’s right to transfer property after his or her death. To determine if a tax is owed, all assets are added up to calculate the estate value. Assets include everything from cash and insurance to real estate and trusts. Deductions and debts are then taken from the gross value, including mortgages and administrative costs. Any property passed on to a surviving spouse is also tax free and deducted from the total.
If the taxable value of the estate is below $5.49 million, no estate or death tax will need to be paid. In 2018, this amount increases to $5.6 million. With the exemptions being so large, most Americans will never need to worry about owing any estate tax. Experts estimate that only 11,310 out of all the people dying in the United States in 2017 are subject to estate tax. That number decreases to 5,460 once deductions and credits are taken.
Estate preparation and taxes can be confusing to everyone. Seniors planning their estates may benefit from contacting a first-rate probate and estate administration attorney. In Texas, a lawyer who is well versed in estate planning can explain the details of current tax laws for his or her client.
Source: fool.com, “What Is the Death Tax, and Who Pays It? — The Motley Fool“, Christy Bieber, Nov. 14, 2017