{"id":10034,"date":"2021-05-17T01:43:33","date_gmt":"2021-05-17T06:43:33","guid":{"rendered":"https:\/\/agrilife.org\/texasaglaw\/?p=10034"},"modified":"2026-04-17T15:17:07","modified_gmt":"2026-04-17T20:17:07","slug":"talking-taxes-estate-tax","status":"publish","type":"post","link":"https:\/\/agrilife.org\/texasaglaw\/2021\/05\/17\/talking-taxes-estate-tax\/","title":{"rendered":"Talking Taxes:  Estate Tax"},"content":{"rendered":"<p>Today, we will kick off a three-part series called Talking Taxes.\u00a0 We are going to focus on three federal taxes that arise frequently for farm and ranch families when it comes to estate planning: the estate tax, the gift tax, and the capital gains tax.<\/p>\n<p>I want to offer two disclaimers.\u00a0 The first is that I am not a CPA or an accountant.\u00a0 I&#8217;m here to offer just basic information, but highly recommend that you consult with your attorney and tax professional for further advice or clarification.\u00a0 Second, there has been a lot of talk from Washington, DC, about potential changes to some of these rules.\u00a0 The posts in this Talking Taxes series will explain the law as it currently is written and applied, but everyone needs to be sure to pay attention to any changes that could be forthcoming.<\/p>\n<p>Let&#8217;s get started today with the Estate Tax.<\/p>\n<div id=\"attachment_10035\" style=\"width: 510px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-10035\" class=\"wp-image-10035\" src=\"https:\/\/agrilife.org\/texasaglaw\/files\/2021\/05\/diana-orey-I80UfIwyzDo-unsplash-681x1024.jpg\" alt=\"\" width=\"500\" height=\"752\" srcset=\"https:\/\/agrilife.org\/texasaglaw\/files\/2021\/05\/diana-orey-I80UfIwyzDo-unsplash-681x1024.jpg 681w, https:\/\/agrilife.org\/texasaglaw\/files\/2021\/05\/diana-orey-I80UfIwyzDo-unsplash-199x300.jpg 199w, https:\/\/agrilife.org\/texasaglaw\/files\/2021\/05\/diana-orey-I80UfIwyzDo-unsplash-768x1155.jpg 768w, https:\/\/agrilife.org\/texasaglaw\/files\/2021\/05\/diana-orey-I80UfIwyzDo-unsplash-1021x1536.jpg 1021w, https:\/\/agrilife.org\/texasaglaw\/files\/2021\/05\/diana-orey-I80UfIwyzDo-unsplash-1362x2048.jpg 1362w, https:\/\/agrilife.org\/texasaglaw\/files\/2021\/05\/diana-orey-I80UfIwyzDo-unsplash-scaled.jpg 1702w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><p id=\"caption-attachment-10035\" class=\"wp-caption-text\"><em>Photo by <a href=\"https:\/\/unsplash.com\/@photographyurway?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText\">Diana Orey<\/a> on <a href=\"https:\/\/unsplash.com\/s\/photos\/cemetery?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText\">Unsplash<\/a> <\/em><\/p><\/div>\n<p><strong>What is it?<\/strong>\u00a0 The estate tax, sometimes called the &#8220;death tax,&#8221; is a federal level tax imposed when a person dies and transfers assets to someone other than a surviving spouse.\u00a0 It is essentially a tax on the right to pass assets to another person.\u00a0 Texas does not have a state-level estate tax, but some other states do.<\/p>\n<p><strong>Who pays it?<\/strong>\u00a0 When the fair market value of the estate is worth more than the recognized exemption, the estate tax is owed.\u00a0 Currently, for 2021, the estate tax exemption is $11.7 million per person.\u00a0 This means that if the person&#8217;s estate is not valued at more than $11.7 million, no estate tax will be owed.\u00a0 Note here that it is the fair market value of the estate at the time of the person&#8217;s death that is used in the estate tax calculation.\u00a0 The cost basis (price paid for an asset in the past) is irrelevant.<\/p>\n<p><strong>How long will the $11.7 million exemption be in place?<\/strong>\u00a0 This really is the magic question.\u00a0 Here&#8217;s the breakdown.\u00a0 Every year, the exemption amount is adjusted slightly for inflation.\u00a0 For example, it increased from $11.58 million in 2020 to $11.7 million in 2021.\u00a0 Current law has this $10 million (adjusted for inflation) value set to remain in place through 2025, at which point it will sunset back to the prior $5 million (adjusted for inflation) per person.\u00a0 To throw more uncertainty into the mix, keep in mind that this exemption amount can be modified by Congress.\u00a0 So, while for now it is set through 2025, Congress could modify that amount.<\/p>\n<p><strong>How is the estate tax calculated?<\/strong>\u00a0 If a person&#8217;s estate value is over the exemption amount, the tax liability will be 40%.\u00a0 For example, if a person died today with an estate valued at $12.7 million they left to their children, their estate tax liability would be $400,000.\u00a0 ($1 million x 40% = $400,000).<\/p>\n<p><strong>When is the estate tax due?<\/strong>\u00a0 If owed, the estate tax is generally due within 9 months of the death.<\/p>\n<p><strong>What exemptions exist?<\/strong>\u00a0 There are certain exemptions from the estate tax.<\/p>\n<p>First, any property left to a surviving spouse is not subject to the estate tax.\u00a0 This is due to the unlimited marital deduction, which allows unlimited assets to be passed to the surviving spouse with no estate tax liability.\u00a0 Keep in mind, however, that at the death of the second spouse, his or her estate would be left to someone else and would be subject to the estate tax if over the exemption amount.\u00a0 One additional note here is that the law allows for portability between spouses.\u00a0 This allows the first deceased spouse to port over any unused portion of his or her estate tax exemption to the surviving spouse, thereby increasing the surviving spouse&#8217;s exemption.\u00a0 For example, assume that wife died in 2021 and used $1 million of her exemption.\u00a0 Portability would allow her to port her remaining $10.7 million over to her surviving spouse, which would then increase his exemption from $11.7 to $22.4 million. ($11.7 million + $10.7 million).\u00a0 In order to qualify for portability, the estate&#8217;s representative must file a Form 706 (estate tax return) within 9 months of the death.<\/p>\n<p>Second, there are certain deductions that may be taken from the gross value of one&#8217;s estate for estate tax purposes, including mortgages and other debts, estate administrations, and property left to qualified charities.<\/p>\n<p><b>What can a person do to avoid estate tax liability?<\/b>\u00a0 There can be a number of options that a person can consider in order to avoid estate tax liability.\u00a0 The key, of course, is that this must be done prior to the person&#8217;s death in order for them to be effective.\u00a0 Anyone who thinks they could potentially have an estate tax issue should contact an attorney, accountant, and\/or other tax professional in order to see what steps might be best for their situation.<\/p>\n<p><b>Where can I find additional information? <\/b> For additional information on the estate tax, check out <a href=\"https:\/\/aglaw.libsyn.com\/episode-79-kitt-tovar-estate-gift-inheritance-tax\">this podcast episode<\/a> I did with Kitt Tovar from the Iowa State Center for Agriculture Law and Taxation.\u00a0 \u00a0Additionally, the Internal Revenue Service actually has some useful explanations <a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/estate-tax\">on their website<\/a>, including overviews and Frequently Asked Questions.<\/p>\n<p><strong>What potential changes have been discussed?<\/strong>\u00a0 With regard to the Estate Tax, there have been rumblings that the Biden administration may look to lower the lifetime exemption from the current $11.7 million\/person to something far lower, such as $3.5 million\/person.\u00a0 This was not included in the American Families Plan that was recently released.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Today, we will kick off a three-part series called Talking Taxes.\u00a0 We are going to focus on three federal taxes that arise frequently for farm and ranch families when it comes to estate planning: the estate tax, the gift tax, and the capital gains tax. I want to offer two disclaimers.\u00a0 The first is that I am not a CPA or an accountant.\u00a0 I&#8217;m here to offer just basic information, but highly recommend that you consult with your attorney and tax professional for further advice or clarification.\u00a0 Second,&#8230; <span class=\"read-more\"><a href=\"https:\/\/agrilife.org\/texasaglaw\/2021\/05\/17\/talking-taxes-estate-tax\/\">Read More &rarr;<\/a><\/span><\/p>\n","protected":false},"author":2443,"featured_media":10035,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[17,35],"tags":[],"class_list":["post-10034","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-estate-planning","category-tax-issues"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Talking Taxes: Estate Tax - Texas Agriculture Law<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/agrilife.org\/texasaglaw\/2021\/05\/17\/talking-taxes-estate-tax\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Talking Taxes: Estate Tax - Texas Agriculture Law\" \/>\n<meta property=\"og:description\" content=\"Today, we will kick off a three-part series called Talking Taxes.\u00a0 We are going to focus on three federal taxes that arise frequently for farm and ranch families when it comes to estate planning: the estate tax, the gift tax, and the capital gains tax. I want to offer two disclaimers.\u00a0 The first is that I am not a CPA or an accountant.\u00a0 I&#8217;m here to offer just basic information, but highly recommend that you consult with your attorney and tax professional for further advice or clarification.\u00a0 Second,... 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I want to offer two disclaimers.\u00a0 The first is that I am not a CPA or an accountant.\u00a0 I&#8217;m here to offer just basic information, but highly recommend that you consult with your attorney and tax professional for further advice or clarification.\u00a0 Second,... 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