Estate Tax Planning

Austin Texas Estate Planning

Historically speaking, the federal estate tax is an excise tax levied on the transfer of a person’s assets after death. In actuality, it is neither a death tax nor an inheritance tax, but more accurately a transfer tax. There are three distinct aspects to federal estate taxes that comprise what is called the Unified Transfer Tax: Estate Taxes, Gift Taxes, and Generation-Skipping Transfer Taxes. Legal planning to avoid or minimize federal estate taxes is both a prudent and an important aspect of comprehensive estate planning.

Federal Estate Tax Exemption

Individuals now receive an $13,990,000 exemption due to the Tax Cut and Jobs Act which was signed into law in December, 2017.  With proper and timely planning, married couples can obtain two exemptions, in essence sheltering $22,980,000. While these numbers have never been higher, the new exemption amounts are set to expire on December 31, 2025. With the new administration, it is anticipated that the exemption amounts will not be lowered. Amounts over the exemption are taxed at 40%.

Annual Gift Tax Exclusion

The annual gift exclusion is currently $19,000, up from $18,000 in 2024.  

Generation-Skipping Transfer Tax Exemption

The amount that can escape federal estate taxation between generations, otherwise known as the Generation-Skipping Transfer Tax Exemption (GSTT) is unified with the federal estate tax exemption and is set at $13,990,000 under the new law. As with estate and gift taxes, the top tax rate is 40%. Properly done, this can transfer significant wealth between generations.

So, what is this GSTT? Basically, it is a transfer tax on property passing from one generation to another generation that is two or more generational levels below the transferring generation. For instance, a transfer from a grandparent to a grandchild or from an individual to another unrelated individual who is more than 37.5 years younger than the transferor.

If you are concerned about how your current estate, gift and generation-skipping planning may function in your situation, we encourage you to schedule a free consultation.

Texas Taxes

Texas has NO estate tax, gift tax, generation-skipping tax, income tax or capital gains tax.