The U.S. House of Representatives voted last month to repeal the estate tax, known to many detractors as the “death tax.” While the bill is unlikely to move through the Senate and even less likely to garner a presidential signature, it highlights important questions many people have as they build an estate plan: What is this estate tax and what is the best way to protect your assets from it?
At Lisa Galvan Law, we have years of experience helping families throughout the San Antonio area with estate tax planning. Read on to learn more about how this important tax planning issue might impact you.
What is the Estate Tax?
Enacted in 1916, the estate tax is a tax on the transfer of the assets of a deceased person. Transfers subject to the tax include property transferred through a will, life insurance payments, and payments made through a trust. It has applied to different levels of wealth over time, and in keeping with inflation, those levels have increased over the years. The tax is something of a political football and has been repealed, altered, and reinstated several times since its inception. While some states impose an estate tax above and beyond the federal tax, Texas has no independent estate tax of its own.
Who Pays it?
Despite the controversy surrounding the estate tax, very few Americans actually end up paying it. To offer some perspective, out of the 2.6 million deaths expected this year in the United States, the Joint Committee on Taxation estimates that only 5,400 estates will pay the tax. The reason for this is the high exemption level of the tax. As of 2013, the wealth of a single person valued at up to $5.43 million is exempt from the estate tax. For married couples, the exemption is up to $10.9 million. Taxable wealth above and beyond these levels is taxed at a rate of 40%. The Internal Revenue Service has additional useful information about the estate tax on its website.
Protecting Your Estate
If you have concerns about the estate tax, it is important to discuss them with a qualified estate planning attorney. You and your attorney will want to make sure that you are taking full advantage of all available exemptions. For high net worth individuals, this is especially important, as you may still have taxable assets even after all exemptions are accounted for. In these cases, you will need an attorney experienced with advanced estate planning, including strategic gift plans, grantor retained annuity trusts, and life insurance trusts.
When it comes to the future of your family, it is important to have quality advice when you need it. At Lisa Galvan law, we provide a full range of estate planning services to families throughout the San Antonio area, from business succession planning to advanced estate planning for high net-worth individuals. Contact us to talk about planning your estate with an experienced lawyer.