Tax Liabilities at Death
Vocabulary: A person who has died is called the decedent.
The federal estate tax disappears in 2010. A person who died in 2016, will only have estate taxes if the estate is worth more than $5.49 million. Federal estate taxes do not apply to most people. If you have an estate that is big enough to have to pay estate taxes, you should talk to a lawyer.
Gift taxes apply to big gifts of money. The law considers something a gift if ownership changes, but the receiver did not pay the fair market value for the property received. For example, if the decedent sold property for less than it was worth or did not expect any payment for the property it could qualify as a gift. Gift taxes do not have to be paid on:
- Gifts of $14,000 per year to an individual
- Tuition or medical expenses paid for the benefit of an individual
- Gifts to your spouse
- Gifts to political organizations or to charities
Prior to transferring large sums of money or other large gifts, you should consult with an attorney or tax advisor.
In Texas, homeowners who are 65 or older or who are disabled can defer (put off) the property taxes owed on their homestead. These same homeowners can abate (stop) a lawsuit to collect back taxes on their homestead. When an elderly or disabled homeowner defers their property taxes or abates a lawsuit to collect property taxes, the taxes do not stop forever. The taxes plus interest plus a penalty keep adding up until the elderly or disabled homeowner dies. Then, the estate must pay the taxes, interest, and penalties.
A surviving spouse between the ages of 55 and 65 can keep the decedent’s exemption by applying at their local tax appraisal office.
After the homeowner’s death, if the estate cannot pay the property taxes, interest, and penalties, then the taxing authority becomes a creditor of the estate and can request that the home be sold to pay the amount due.
If you have a reverse mortgage, you generally cannot defer property taxes. This usually is considered a breach of the reverse mortgage.
For detailed information about deferring property taxes, contact your local tax appraisal district office.