navigating estate tax

Gifting can be a rewarding opportunity to those who have the means to do it. In the coming weeks, we will explore proper estate planning so your gifts have the maximum benefit for benefactors in a new series we are calling Don't Be A Tax & Probate Turkey™!


Click on the video to see the entire presentation!


It is important to understand some limits set by the Internal Revenue Service (IRS) on both annual and lifetime giving that can have serious tax implications for the giver. A lack of such understanding could leave you feeling like a "Tax & Probate Turkey."


Americans can give annually without affecting their lifetime exemption (which we address shortly). In 2020, the cap for this kind of gift is $15,000. This is a per recipient amount meaning you can give up to $15,000 to as many people as you would like each year without penalty. The IRS recognizes married couples as two individuals, meaning couples can gift up to $30,000 to as many people as they wish each year. Think carefully before you surpass these amounts in any year - expensive tax consequences may attach if you exceed these annual maximums.


The Tax Reform Bill of 2017 enacted a substantial value for people who wish to gift without paying the up to 40% estate tax. The law doubled the amount of money that can be given to heirs and pay no federal estate or gift tax in their lifetime - otherwise known as the lifetime exemption. The IRS adjusts the amount periodically for inflation, so the current lifetime tax-exempt amount in 2020 is $11.58 million for individuals and $23.16 million for a married couple. If your individual or marital estate is approaching these amounts, you need to start planning NOW!


Beneficiaries pay no tax on inherited assets. Profits from the sale of inherited assets by the beneficiaries are based upon value at the time of death, not the time the deceased acquired. This is important in calculating the value of the entire estate. Real estate is calculated at fair market rate on the date of death. Commodities are based on the exchange published value on the date of death. Assets like vehicles and equipment are given fair market value, not depreciated value.


Many estates can avoid probate altogether if all their assets are held by third parties or another individual is granted an interest in real estate. Confirm that the beneficiary is a person or entity, and NOT your estate for accounts controlled by third parties. Execute a TEXAS TRANSFER ON DEATH DEED for your real estate.


The Fowler Law Firm, PC offers a free initial consultation to anyone needing help with tax or probate law in Texas.


The Fowler Law Firm, PC has created a virtual presentation on our Don't Be A Tax & Probate Turkey™ series including toe-tapping music provided by Texas fiddle favorites Franklin, Franklin, Solomon (1966) courtesy of the TEXAS FOLKLIFE ARCHIVE.


About your authors:

Davis Oliver serves as The Fowler Law Firm PC Managing Attorney Georgetown, counsels daily with many private employers and represents them in trial.


John Pearce is a tax attorney and Certified Public Accountant joint licensed in Texas, Louisiana, Georgia, and Kentucky. John regularly counsels with both large and small nonprofit organizations. He currently serves pro bono as Texas CPA Society Treasurer, Rotary District 5870, and Austin Bar Association Business & Taxation Section Treasurer.


Laura Fowler is the Managing Shareholder of The Fowler Law Firm PC. She is a regular speaker to real estate and business groups and an instructor licensed to teach continuing education courses required by the Texas Real Estate Commission.


About The Fowler Law Firm PC: Attorneys with The Fowler Law Firm PC proudly donate their talents and resources to many area charities and teach courses in Continuing Education Click HERE for more information. Follow our charitable adventures on our Facebook or LinkedIn pages.