Estate Planning Needs Proper Tax Planning 

elderly man on laptop
July 19, 2022

Procrastination is the biggest obstacle to overcome when it comes to estate planning. Even though no one likes to think about passing away, poor planning or no plans at all can result in family conflicts. Additionally, you can prevent having your assets getting into the wrong hands and paying high taxes.  

Most people assume that all this planning happens by simply drafting a will. However, there’s more to estate planning than simply writing a will. Accounting for all of your assets and ensuring that beneficiaries and heirs receiving assets are two components of thorough planning. Therefore, with this approach, estate taxes, gift taxes, and other tax impacts are managed and minimized.  

Both estate taxes and inheritance laws are complicated, estate planning can feel overwhelming, and it’s natural to want to avoid planning altogether. However, this doesn’t have to be the case. With guidance from a dedicated and  professional estate tax planning team, you can be reassured that you plan correctly. Additionally, you will have a better understanding of estate taxes and inheritance laws and how they relate to your estate planning needs.  

 Tax Professionals Can Assist You with Estate Planning 

Our knowledgeable tax experts at Waters Hardy have exceptional experience in estate tax planning and compliance. Furthermore, we are here to help guide you in creating a customized plan for your estate taxes that works for you and your loved ones. 

 Now is an excellent time to get started if you have been putting off your estate planning. If you do have an estate plan in place, it’s wise to revisit your estate plan when your circumstances change. This may include a marriage or divorce, the birth of a child, the loss of a loved one, getting a new job, or being losing your job.  

Review Your Estate Taxes  

If your circumstances haven’t changed much, laws may have changed since you last reviewed your estate tax plan. Take the opportunity to review estate taxes and inheritance laws and update your plan as needed. It will take effort, but revising a plan is better than having no plan.  

 Taking the time to consider your estate plan seriously demonstrates your commitment to your financial legacy and your loved one’s ongoing financial well-being. Your estate transfer will be simpler for everyone if you establish an estate plan as soon as possible.  

What is a Federal Estate Tax? 

 Some states are more tax-friendly than others. In all states, however, there is a standard federal estate tax.  

 A federal estate tax is a tax that the federal government levies based on the net value of the decedent’s estate. The estate itself pays these federal estate taxes. 

 The federal estate tax may be imposed on the value of your taxable estate at the time of your death. Each U.S. descendent can transfer a set dollar amount of assets free of the federal estate tax. This amount is known as the exemption amount. 

 The good news for the average taxpayer is that this only applies to the wealthiest estates. For example, in 2022, the IRS estate tax exemption was $12.06 million per individual. 

A Brief Overview of the Federal Gift Tax 

 A federal gift tax is imposed when you make gifts in your lifetime that total more than the exemption amount. In 2022, $16,000 was transferable to an unlimited amount of people without incurring the gift tax. This applies to contributing to a nonprofit organization and you can give unlimited gifts to your spouse. In addition, paying expenses to a medical provider or educational institute is subject to a federal gift tax.  

Generation-Skipping Transfer (GST) Tax 

 A GST tax may be due, in addition to the estate or gift tax, at the highest federal estate tax rate when you transfer assets to someone two or more generations from you. If the beneficiary is not related to you, the tax may be due if that person is more than 37 ½ years younger than you.  

 Understanding the Inheritance Tax 

An inheritance tax is a tax that is levied at the state level on the assets that beneficiaries inherit from an estate.  

 Like state estate taxes, this is not standard from state to state. For example, Texas repealed its inheritance tax in 2015. This means that, in Texas, if your loved ones inherit from you, they will not be taxed on the assets they receive. 

 Why is it Important to Plan for Estate Taxes? 

 If you die without a will or other estate planning documents, you lose the ability to guide the direction of your finances and the execution of your estate plan. Dying without a will guarantees the distribution of your assets will be left to the state. That means they will determine how your estate will be handled. 

 Furthermore, if you have a will in place as part of your estate plan, you have the advantage of avoiding the majority of the state’s inheritance tax laws. Additionally, this generally applies to estates without wills.  

 When you take the time to create an estate plan that specifically addresses your wishes for your estate, it should also consider all tax implications. This gives you complete authority over the estate you worked so hard to secure and enables you to divide it however you see fit. If you have a solid, valid estate plan, including tax and legal specifications, it is almost assured that it will be executed exactly as planned.  

Estate Tax Planning with Waters Hardy  

 The regulations surrounding estate tax planning can be complicated to understand. However, the expert tax professionals at Waters Hardy can assist you in understanding all of your tax options related to estate taxes. Our team focuses on accounting services regarding tax planning and compliance, including estate tax planning. 

 We can take the complexity of estate tax planning from you and efficiently guide our clients. We will generate an estate tax plan that carefully addresses your specific tax implications to protect your estate.  

Contact us to see how we can help with your estate tax needs.  



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