While you’re likely familiar with the saying about death and taxes, taxes are the last thing any grieving family wants to worry about. Estate tax planning helps put documents and financials in place to remove the stress of tax issues at the time of death, but for many families in Texas, neither federal or state inheritance taxes are likely to be an issue.
According to the Texas State Comptroller, if the date of death associated with an estate is after Jan. 1, 2005, then no state inheritance tax is due. Estates under the federal threshold of $5,340,000 in value as of 2014 also don’t have to file a federal estate tax return.
It’s not impossible that families are wrapping up issues with old estates, in which case some state taxes may be due. Prior to Jan. 1, 2005, requirements for state inheritance tax were decided based on the value of the estate. Estates related to a date of death between Jan. 1, 2004 and the end of that year were required to file state inheritance tax forms if the estate value was $1,500,000 or greater. The threshold for estate taxes moved from $275,000 in 1983 to $1,000,000 in 2002, going up incrementally throughout the years in between.
Prior to the dissolution of the estate tax in Texas, taxes and forms were due nine months following the date of death unless an extension was requested and received. Individuals still paying on old estate tax requirements are paying penalties and interest on that amount.
Estates aren’t in the clear financially just because estate taxes aren’t owed. Other tax issues, such as business or income taxes, may still be relevant to an estate. It’s important to understand how legal and financial matters coincide to ensure heirs aren’t left with an unplanned tax burden.
Source: Window on State Government, “Inheritance Tax Frequently Asked Questions” Sep. 12, 2014