The Two Certainties in Life: Death & Taxes
The Barrows Firm in Southlake Helps with Answers and Solutions for Marriage, Divorce, Death, and Taxes
Tax Day this year is Tuesday, April 18, 2023. At the Barrows Firm in Southlake, we help families with wills and estate planning, and tax status and property issues, to take advantage of the best options for families. We may never know the date of our last day, but we can be prepared so that our wishes are carried out with a proper will, and our assets and gifts are properly transferred. Avoiding taxes on inherited money and assets is the objective of estate planning at the Barrows Firm. And as our marital and parental situations may change, we must also consider whether we need to make different tax decisions, how to file, and how to protect assets, two important considerations. We focus on answering all your death and tax issues at the Barrows Firm. Attorney Leslie Barrows can help.
How do we know which tax issues apply as we collect our financial information and prepare to do our taxes or consult a tax professional? When do we ask our attorney about tax issues? What if I am forgetting something important? For these common questions, Attorney Leslie Barrows and the team of professionals at the Barrows Firm frequently help people find the right directions and answers to all their questions, especially the questions they didn’t know they had. For more on point, see our blog article, Divorce Taxation: Avoiding Penalty for QDRO Distribution Withdrawals (and other common divorce and tax questions).
Protecting your family and accumulated wealth, property, and assets requires a reasonably consistent review of the laws and status of people in the family, who may be preparing for, or going through big life events. Marriage, the birth or adoption of children, divorce, and death, are all times that we need to sit down and go through issues of life and death, income, and taxes.
Tax Considerations for Changing Status from Married to Single, and Dependents
When does your tax status officially change? How, by whom, and when will your children be claimed as dependents? These are the common questions people ask, but there are property considerations as well. We have several accountants and CPAs who work with family law clients to make the best tax filing decisions and help with asset questions about buying, selling, and renting. For example, whatever happens to the marital residence affects potential property tax liability. What if you decide to buy or rent a smaller home, condominium, or apartment? The entirety of the financial picture is important, especially when a divorce situation is stretching a family’s income to pay for more than one residence. Get guidance on life, death, and tax issues at the Barrows Firm.
There is No Inheritance Tax in Texas
In Texas, there is no inheritance tax assessed on our death, as is the case in some states. Inheritance tax is a tax that is imposed on the transfer of an individual's assets to their heirs or beneficiaries upon their death. This tax is levied on the total value of the deceased's estate, which includes all their possessions, such as property, money, investments, and personal belongings. The rate of inheritance tax varies depending on the jurisdiction, and in some cases, it may also depend on the relationship between the deceased and the beneficiary. Note that you may have to pay federal estate taxes, but no state inheritance tax applies in Texas.
Inheritance tax is a controversial topic, with some arguing that it is a fair way to redistribute wealth and reduce inequality, while others argue that it is a form of double taxation and an unfair burden on families who are already dealing with the loss of a loved one.
It's important to note that not all countries have an inheritance tax. In some jurisdictions, the tax may be called an estate tax or a death tax, and the rules and rates may vary significantly. If you have questions about inheritance tax in your country or state, it's best to consult with a financial advisor or tax professional.
Texas Does Have Estate Taxes, But Only on Estates Valued Over $5 Million
In Texas, the estate tax only applies to gross estates with a taxable value of over $5 million, and the tax rate ranges depending on the value of the estate. Additionally, the federal government imposes an estate tax on estates with a taxable value of over $12,060,000 in 2022, which will rise to 12,920,000 in 2023. The Barrows Firm attorneys assist with your estate planning work with tax and trust professionals who assist in preparing for the accumulation and transfer of wealth, minimizing the exposure to tax liability, especially considering estate taxes.
Property Taxes Pack a Punch to Inheritors when Property Tax Exemptions Disappear on Death
In Texas, our property taxes can be frozen at their rate when a person lives in their home, has a homestead exemption, and is 65years of age. And while the senior resident enjoys the frozen tax rate that doesn’t increase when they have that homestead exemption, the property passed on to others will not receive the exemptions, because they are non-transferable and do not pass to their heirs of an estate, as a matter of law. This begs the question of what to do with the property when someone passes. In Texas, we also have properties with agricultural exemptions that may expire with that person’s status of home and property ownership. In many of these cases, the property is transferred to heirs upon death and has a tax bill that is so high without the exemptions, that family is better off selling the land, sometimes to developers when the land is larger and in a growing area. Could something else be done with the property, using a trust to secure its future? These are all questions that are different for every family. We spend our lives working to build wealth and income to hopefully benefit our future generations, and that planning means taking into account every variable.
Estate Planning Updates Are Needed After a Divorce in Texas
The family estate planning needs to be updated if it was drafted when you were married, with the assumption that marriage would continue until your death. When you outlive the marriage, update the estate plan accordingly. This is not difficult work and the status updates are important. In addition, your estate planning attorneys at the Barrows Firm help remind you to also contact financial institutions where you may have listed a former spouse as the person payable upon death, or otherwise marked them as a beneficiary in the event of your death.
Do not forget those Power of Attorney Documents when doing your updating. The last thing anyone needs is an acrimonious ex-spouse with continuing authority over your business or life decisions. Now, if you want to leave your former spouse with some power of attorney agency, you can do that if you wish, and if you do, definitely update your documents to prevent disagreements among family in the future. Making your wishes known is important, even if they might not be what people expect.
Find the Best Assistance with Marriage, Divorce, Life, Death, and Tax issues at the Barrows Firm (817) 481-1583