Dallas Estate & Gift Tax Attorney
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Schedule a consult today by calling (214) 234-2701
Dallas Estate & Gift Tax Attorney Serving the Dallas-Fort-Worth Metroplex
Sometimes, it can feel as if you’re working just to pay taxes. You buy products to use in your business, and you have to pay sales tax. You earn the money to buy the things you need in daily life, and you have to pay federal income taxes. You give a generous gift to your child, and you might have to pay gift tax. Even when you die, your estate might have to pay federal estate taxes.
Back in 2017, the federal government enacted significant tax reform that impacted tens of millions of people. The dramatic increase in the federal estate tax exclusion left some believing the importance of estate planning was reduced to almost nothing.
What few realize is that this dangerous assumption doesn't take into account the fact that the higher exclusion is slated to reduce to roughly $5.5 million at the end of 2025.
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Let us work together with you to assess your estate and craft intelligent strategies for gifting both during your life and after you pass.
Understanding Estate, Gift, & Inheritance Taxes in Texas
Estate Taxes in Texas
Here's some good news--Texas does not have a state estate tax, but we are subject to federal estate taxes. When a person dies, the administrator of the estate gathers all of the decedent’s assets and pays the valid debts of the estate. The amount remaining is the value of the estate.
If the value exceeds the federal estate threshold for that year, the administrator of the estate will have to pay federal estate taxes before distributing the remaining amount to the heirs and beneficiaries. If the value of the estate falls below the federal estate tax threshold, the estate will not owe federal estate taxes.
The goal of planning for estate taxes is to bring the value of your estate below the threshold so that no federal estate taxes will apply. We can accomplish this result through a combination of strategies, like gifting during your lifetime, setting up trusts, creating foundations and family limited partnerships.
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Gift Taxes in Texas
We also do not have a gift tax in Texas, so you will not owe money to the state if you transfer a high-value asset to someone during your lifetime. We are, however, subject to the federal gift tax, so the transfer could cost you.
The person giving the gift (grantor or donor) is responsible for the gift tax, not the recipient. The federal gift tax exemption for 2020 is $15,000 per recipient. Gifts over the exemption count against your lifetime gift tax exemption and your eventual federal estate tax exemption.
We can structure your gifts to eliminate or reduce the gift tax in some situations. For example, you might want to give your nephew $25,000 as a college graduation gift. If you give the money outright to your nephew, $10,000 (the amount over the $15,000 annual gift tax exclusion) will be taxable. On the other hand, if you give him $12,500 and your spouse gives him $25,000, both gifts will fall under the gift tax threshold, but he will still receive a total of $25,000.
You can use annual gifting to reduce the value of your estate and thereby minimize to eliminate future estate taxes. Let’s say that you have six grandchildren. You and your spouse can each give each grandkid $15,000 a year (this amount can vary from year to year), reducing your estate by $180,000 every year. If your estate is $1,800,000 over the federal estate tax threshold, you can reduce it to the exclusion limit in 10 years of annual gifting while transferring the money to the people who would want to receive it through your estate.
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Inheritance Taxes in Texas
Texas does not have an inheritance tax, but some other states do. If you inherit money from someone in a state that imposes an inheritance tax on out-of-state heirs, you might owe that state money. Unlike estate taxes, the recipient pays inheritance taxes, not the estate of the deceased. If you anticipate an inheritance that could create inheritance tax liability, we can explore strategies to eliminate or minimize that tax burden.
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Please note that tax laws change constantly. This information is for informational purposes only and is not tax advice. We will need to talk with you about the current tax laws when we develop your estate and gift tax plan.
In Texas, you do not have gift tax consequences for these types of gifts:
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A gift to your spouse, if your spouse is an American citizen
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The payment of someone’s tuition for education. You must pay the amount directly to the institution, not to the individual. The payment can only cover tuition, and not books, supplies, housing, or meals.
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Donations to IRS-approved charities.
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Contributions to political organizations.
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Paying someone else’s medical bills. You must pay the health care provider directly.
Estate & Gift Tax Planning to Minimize the Tax Bite
Advanced Estate and Gift Tax Planning with Dallas Attorney, Jordan Hix
In general, Texas has low taxes. We do not have individual state income tax, estate tax, gift tax, or inheritance tax. On the other hand, you are still subject to federal income tax, estate taxes, and gift taxes. Your state business taxes can vary, depending on factors like the type and size of your company.
There are many tax exemptions available in Texas that can save you and your business money on your tax obligations. If you are a disabled veteran, age 65 or older, or a disabled non-veteran, you might qualify for a reduction of your homeowner’s taxes. Some people qualify for a homestead exemption that reduced the appraised value of their principal residence.
Schedule a consult today by calling (214) 234-2701
Estate & Gift Tax Planning with Dallas Estate-Planning Attorney, Jordan Hix
In addition to using annual gifting and educational exclusions, there are other options for getting assets into the hands of your intended beneficiaries while avoiding or reducing the tax implications. We can guide you through the process of:
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Making contributions to a 529 college savings account
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Setting up a foundation, family trust, or family limited partnership
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Creating an irrevocable trust and funding it with high-value assets to bring your estate below the federal estate tax threshold
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Exploring a wide variety of trusts with you, to find the best fit for your situation and goals
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Crafting a custom-fit individualized plan to minimize the amount of estate and gift taxes
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Showing you how to manage these entities so that they do not lose their preferred tax treatment
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Explaining how you can make gifts through these entities without incurring tax liability
At Hix Legal, we help clients keep as much of their hard-earned wealth as possible and be able to transfer their assets to their intended beneficiaries with the government taking as little as possible. Let’s work together to make these things happen.