Since the taxman always seems to have a hand in everything, it is natural to assume that your family will be forced to pay estate taxes. This is understandable, but in fact, there is a very good chance that your loved ones will be off the hook on that level.
In this post, we will look at estate taxes first and then move on to some other threats to your legacy that are looming in the background.
Federal Estate and Gift Taxes
The federal estate tax is the most widely discussed tax in this area. It applies to the value of your estate at the time of your death, but only if your assets exceed a certain threshold.
As of this year, the federal estate tax exemption is $15 million per individual. This means you can pass up to that amount tax-free.
If you are married, you and your spouse can combine your exemptions, effectively shielding up to $30 million from the federal estate tax. Only amounts above this limit are subject to taxation.
In addition to the estate tax, there is a federal gift tax that applies to certain lifetime transfers. However, gifts you make during life also count against your estate tax exemption.
You also have an annual gift exclusion that allows you to give up to $19,000 per recipient each year without reducing your lifetime exemption. This exclusion is a useful tool for gradually transferring wealth.
State-Level Estate and Inheritance Taxes
Some states have their own estate or inheritance taxes that apply on top of the federal tax. Fortunately, Oklahoma does not impose either of these taxes.
This favorable tax climate makes Oklahoma an appealing place to retire and preserve more of your wealth for your loved ones.
Income Taxes
One common misconception is that beneficiaries must pay income tax on the assets they inherit. In most cases, this is not true.
If your heirs receive cash, investments, or property from your estate, they generally do not owe income tax on those distributions. However, any income those assets produce after they are inherited is taxable to the recipient.
For example, if your child inherits a rental property and later collects rent, that rental income must be reported. The same is true for dividends and interest earned after your assets are transferred.
Capital Gains Tax
When you pass away, your assets receive a new cost basis equal to their fair market value on your date of death. This step-up can significantly reduce or even eliminate capital gains tax liability if your heirs sell the property shortly after inheriting it.
For example, if you purchased stock for $100,000 years ago and it is worth $500,000 when you die, your heir’s basis resets to $500,000. If they sell the shares right away, there may be little or no taxable gain.
Other Threats
While estate taxes might not be a problem for most families, there are other threats. Estate planning involves more than just tax efficiency. You also need to think about practical risks that can reduce what your heirs receive.
Costly DIY Planning Mistakes
Many people try to write their own wills or use generic online forms. A simple error or unclear language can lead to disputes, delays, and unnecessary expenses.
Preventable Estate Challenges
Family conflicts and contested wills can consume time and resources. Clear, professionally prepared documents reduce the likelihood of disagreements and protect your wishes.
Long-Term Care Costs
Nursing home care and in-home assistance are extremely expensive. If you need long-term care, Medicaid may be the only option since Medicare doesn’t cover custodial care.
However, qualifying requires careful planning years in advance. Otherwise, your assets could be consumed by care costs instead of passing to your heirs.
No Asset Protection or Spending Safeguards for Heirs
If you leave an inheritance outright, your heirs might lose it to creditors, lawsuits, or poor spending choices. Trusts can protect assets and ensure your beneficiaries use them responsibly.
Schedule a Consultation Today!
When you work with our firm, we will learn about your situation and your objectives and make recommendations based on the circumstances. Ultimately, you will emerge with a tailor-made plan that is perfect for you and your family.
To get started, call our Oklahoma City estate planning office at 405-843-6100. Our Tulsa location can be reached at 918-615-2700, and you can use our contact form to send us a message.
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
- Choosing the Right Successor Trustee: Key Considerations - October 8, 2026
- Aging in Place: A Medicaid Waiver Can Fill the Gap - October 6, 2026
- Does Every Estate Go Through Probate? - September 29, 2026
