Texas does not have inheritance tax. However, there is federal estate tax that all Texans have to face. In the old days, estate planning revolved around minimizing the estate tax. With a tax exemption from federal estate tax of $12.06 million for the year 2022, not many people have to worry about paying federal estate tax when they die. Instead, estate planning is now shifted to protecting income by minimizing income tax for the beneficiaries, and also protecting assets from creditors, divorcing spouses or beneficiaries who have poor money skills. These goals could be achieved by using either revocable or irrevocable trusts. Whether you would benefit most with an estate plan that is trust-based or will-based depends on the size of the estate, your family situation, the beneficiaries and the tax environment.
Regardless of whether your plan is trust-based or will-based, you should also consider executing the following ancillary documents:
- Medical power of attorney
- HIPAA authorization
- Directive to physicians and family or surrogates
- Durable power of attorney, and
- Declaration of guardian