Estate Tax Planning Services for Texas Property Owners
Estate tax planning services help estate owners protect their assets and ensure loved ones receive the property they are promised. These services are intended to prepare an estate owner for what comes after they pass away – specifically, how beneficiaries will receive their inheritance and how to minimize taxes on the estate.
If an estate plan isn’t developed, beneficiaries may be subjected to an extended, expensive probate process. Estate tax planning can minimize the impact of probate and estate taxes with a variety of strategies, including:
- Leveraging the annual and lifetime gift exclusion
- Using trusts to secure assets for beneficiaries
- Preparing for the probate process
- Establishing a family limited partnership
- Investing into an education savings plan (like a 529 plan)
Estate tax planning is complex, and the stakes can be extremely high, but a trusted CPA and financial advisor can protect a family’s wealth with their understanding of tax laws.
Five Estate Tax Planning Strategies That Your Financial Advisor Can Provide
Your CPA can implement several estate tax planning tools designed to minimize your estate’s tax burdens and protect beneficiary assets, including:
- Taking advantage of the annual and lifetime gift exclusion – The annual gift exclusion for 2024 is $18,000, meaning taxpayers may give $18,000 worth of gifts to a single recipient before the lifetime exclusion is affected. A married couple filing jointly may thus give $36,000 to a single person in 2024 before drawing from the lifetime exclusion.
With advanced planning, estate owners can remove hundreds of thousands of dollars’ worth of assets from their estate every year through gifts, tax-free. - Removing assets from the estate with a trust – Trusts are a primary estate tax planning vehicle, as they exempt property from probate and estate taxes. There are numerous estate planning trusts to choose from, including revocable (living) and irrevocable trusts, irrevocable life insurance trusts (ILITs), grantor retained annuity trusts (GRATs), qualified personal residence trusts (QPRTs) and charitable remainder annuity trusts. Some of these trusts provide income to the trustee during their lifetime or allow estate owners to exempt real estate.
Your financial advisor or CPA can get creative with how they establish and fund trusts, with the goal of maximizing tax savings for their client and minimizing the impact of probate. - Ensuring probate can be completed efficiently – The longer probate drags on, the more expensive it will become. To ensure your property is passed to beneficiaries and not the state, it’s important to minimize the time it takes to pass assets through the court. Estate tax planning attorneys are deeply familiar with the probate courts in their area – an advantage when interpreting and organizing essential documentation (wills, trust documents, etc.) for probate purposes.
- Creating a family limited partnership – A family limited partnership (FLP) is a business owned by two or more family members, and functions like a typical limited partnership, with one or more acting partners and limited partners (who provide funding but no decision making). FLPs can be used to move assets from one family member to another within the FLP without transferring ownership of the business itself.
- Funding a 529 college saving plan – A 529 college savings plan allows estate owners to fund a child’s or grandchild’s education with tax-advantaged contributions that grow tax-free over time. As long as the account is used for approved educational expenses, withdrawals are tax-free. In effect, 529 plans can be used to remove taxable assets from the estate and to a tax-advantaged plan.
Estate taxes can be reduced or avoided with clever use of tax-saving tools. Your estate planning advisor can mix and match these strategies to minimize your and your beneficiaries’ tax burdens.
The Advantages of Working with a Houston CPA for Tax Compliance
Estate tax planning services provide value to estate owners in several ways. For example, these services:
Minimize estate and inheritance taxes – Estate taxes are only applied to high-value estates – those with assets equal to or greater than $13.61 million (for the 2024 tax year). This value is determined using the fair market value (FMV) of all property, not what was paid to acquire the property.
Federal estate tax rates can run up to 40 percent, and some states impose additional taxes, like inheritance taxes, that will increase the estate’s effective tax rate. Effective estate planning can identify various strategies to remove or exempt assets from this value calculation, reducing (or avoiding) estate taxes.
Ensure all probate documentation is analyzed from a tax planning angle – Wills, trusts, powers of attorney and other estate-relevant documentation will be used by the probate court to identify beneficiaries, and the assets owed to them.
As these documents will help set the course for probate, it’s important that your estate tax planning advisor (or CPA) review them to ensure they align with your overall tax planning goals.
Help with complex business tax and succession issues – Estate tax planning is much more complex if a business is involved. If a business owner dies without a will, for instance, the state uses a default intestate succession process that may not align with the estate owner’s wishes. Texas is a community property state, so most assets – including a business – are inherited by the spouse, with the children receiving a smaller share, then the parents and siblings.
There are significant tax implications involved in transferring ownership of a business or business-owned assets. Your estate tax planning accountant will ensure any resulting tax liabilities are minimized within the bounds of the Internal Revenue Code.
An Estate Tax Planning Accountant Will Ensure Your Assets are Prioritized
Only a small number of estates have to contend with estate taxes, but they can extract large amounts of wealth if they aren’t planned for properly. An estate tax planning CPA can help spread your estate’s wealth to beneficiaries in ways that reduce the impact of estate taxes – so your family’s hard-earned wealth remains in the family.
