While you do need an estate planning attorney to prepare an estate plan properly, you don’t need to go to law school to understand basic facts about estate planning. As reported in a recent article from the Pauls Valley Democrat, “Some real facts about estate planning,” getting the right information on estate planning basics can alleviate unnecessary anxiety and help resolve concerns.
You can use a trust to avoid taxes. Well, not always. Creating a trust alone doesn’t save taxes. It depends upon the type of taxes being discussed—income taxes, federal estate taxes, state estate taxes, or inheritance taxes—and the type of trust being created.
The person who establishes the trust, known as the grantor, pays income tax on a revocable living trust. If the trust is an irrevocable trust, income held in the trust will be taxed at rates near the highest individual tax rate.
Trusts do offer possible estate tax savings, depending upon the type of trust and how it’s structured. However, estate taxes aren’t even a concern for most people, since an individual must own more than $13.9 million of assets at the time of their death before any federal estate tax applies. Whether or not this historically high exemption level remains after December 31, 2025, is still unknown and you should speak with your estate planning attorney to be sure you are prepared if your estate is near the $7 million level just to be sure.
The heir pays estate taxes. Not always. Beneficiaries don’t pay the estate tax. The estate pays federal and state estate taxes. Federal estate taxes apply only to the estates of people with large amounts of wealth, who have likely done the proper estate planning to avoid paying estate taxes in the first place.
If you live in one of the few states with an inheritance tax, then you’ll pay inheritance tax based on the laws of your state.
If inherited assets include a large amount of appreciation, there won’t be any capital gains taxes paid because the recipient receives the assets at their fair market value at the date of death. For example, let’s say your mother dies owning $100,000 of land, which she bought in 1958 for $10,000. If she sold the land, she’d pay capital gains tax on $90,000. However, her heir’s basis is $100,000, and they could sell the land for $100,000 and pay no taxes.
The best way to avoid worrying about estate planning is to schedule a consultation with an experienced estate planning attorney and discuss your unique situation. They’ll be able to create a plan to minimize your taxes, discuss whether a trust would be appropriate for you and your heirs, and give you the peace of mind that comes with knowing you’ve taken care of yourself and the next generation.
Reference: Pauls Valley Democrat (April 11, 2025) “Some real facts about estate planning”