Learn About Texas Estate Tax Information

Understanding Texas Estate Taxes and What You Need to Know

Many people wonder whether Texas has estate taxes, and the answer is straightforward: Texas does not currently impose a state-level estate tax. This is an important distinction that sets Texas apart from other states. While the federal government does collect estate taxes on very large estates, Texas residents do not pay an additional state estate tax on top of federal obligations.

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However, the absence of a state estate tax does not mean Texas residents can ignore estate planning entirely. Federal estate taxes still apply to estates exceeding certain thresholds, and proper planning remains essential for managing assets, protecting family interests, and ensuring wishes are carried out after death. Understanding the difference between state and federal taxes helps Texas residents make informed decisions about their financial futures.

The federal estate tax threshold, also called the exemption amount, changes periodically. As of 2024, the federal exemption is approximately $13.61 million per person. This means estates valued below this amount typically do not owe federal estate taxes. However, this threshold is scheduled to decrease in 2026 unless Congress takes action. Texas residents with substantial assets should pay attention to these changes.

Many Texas residents also wonder about inheritance taxes, which are different from estate taxes. Texas does not have an inheritance tax either. Beneficiaries who receive money or property from a deceased person's estate do not owe state taxes on those inheritances. This is another advantage for Texas families managing estates.

Practical Takeaway: While Texas avoids state estate and inheritance taxes, federal taxes may still affect large estates. Understanding both the state and federal landscape helps guide decisions about asset management and family planning.

How Federal Estate Taxes Work for Texas Residents

Although Texas has no state estate tax, federal estate taxes apply to Texas residents just as they do to people across the country. The federal government taxes the total value of a person's estate when they pass away. This includes real estate, bank accounts, investments, retirement accounts, life insurance, and other valuable property.

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The federal exemption amount determines whether an estate will owe taxes. In 2024, individuals can leave up to $13.61 million to heirs without federal estate taxes. For married couples, this amount can effectively double to $27.22 million if both spouses use their exemptions through proper planning. However, married couples must take specific steps during the first spouse's lifetime or within nine months of their death to preserve both exemptions. Without proper planning, the surviving spouse may lose the first spouse's unused exemption.

The federal estate tax rate is 40 percent, applying only to the portion of an estate that exceeds the exemption threshold. For example, if a Texas resident with an estate valued at $15 million passed away in 2024, only the $1.39 million above the exemption would be subject to the 40 percent tax, resulting in approximately $556,000 owed to the federal government. This highlights why proper planning matters for high-net-worth individuals.

One critical factor is that the federal exemption is not permanent at current levels. The exemption amount is scheduled to decrease to approximately $7 million per person (adjusted for inflation) starting January 1, 2026, unless Congress changes the law. This scheduled decrease has prompted many Texas families to consider their options sooner rather than later. Some residents are exploring strategies to take advantage of the current higher exemption while it lasts.

Practical Takeaway: Texas residents with estates valued near or above the federal exemption threshold should understand how federal estate taxes work and consider consulting with planning professionals about strategies that may reduce tax burden on their heirs.

Estate Planning Strategies Available in Texas

Although Texas lacks a state estate tax, residents still benefit from thoughtful estate planning. Several strategies and tools exist under Texas law that can help manage assets, reduce federal taxes, and ensure assets pass to intended beneficiaries smoothly. These strategies work within both Texas state law and federal tax regulations.

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One common approach is creating a will, which is a legal document that directs how property should be distributed after death. In Texas, wills must be signed by the person creating the will (called the testator) and witnessed by two people. A will allows individuals to name an executor to manage their estate and can specify who receives specific items or property. Without a will, Texas intestacy laws determine how assets are distributed, which may not match a person's wishes.

Trusts are another important tool. A living trust, created during a person's lifetime, can hold property and direct how it is managed and distributed. Trusts can help avoid probate, which is the court process that validates a will and oversees estate distribution. Avoiding probate can save time and money, and it keeps estate matters more private. Texas law recognizes various types of trusts, including revocable living trusts that can be changed during a person's lifetime.

For higher-net-worth Texas residents concerned about federal estate taxes, more sophisticated strategies may apply. These might include irrevocable life insurance trusts (ILITs), which keep life insurance proceeds out of the taxable estate; charitable remainder trusts, which provide income while supporting charitable causes; and annual gifting strategies that use the federal annual gift tax exclusion (currently $18,000 per person in 2024). Each strategy works differently and has different requirements and outcomes.

Texas also has favorable laws regarding homestead property. Texas homestead exemption laws protect a primary residence from creditors in certain situations, which can be part of broader asset protection planning. Additionally, Texas is a community property state, meaning spouses typically own marital property equally, which has implications for how property passes to heirs.

Practical Takeaway: Texas residents have multiple tools and strategies available for estate planning. Understanding the differences between wills, trusts, and other approaches helps inform discussions with planning professionals about which methods suit individual circumstances.

What Happens to Estates Without a Plan

When someone passes away in Texas without a will or other estate plan, the state's intestacy laws take over. These laws determine how property is divided among family members based on relationships, not on what the deceased person might have wanted. Understanding intestacy provides context for why planning matters.

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Under Texas intestacy rules, property is distributed based on a priority system. If the deceased person was married, the surviving spouse generally inherits a portion of the estate, with the size of that portion depending on whether there are also surviving children. If there are no surviving children, the surviving spouse typically receives all community property (property acquired during the marriage) and a share of separate property (property owned before marriage or received as a gift or inheritance). If there are surviving children, the distribution becomes more complex, with the surviving spouse receiving a portion and the children receiving the remainder.

If someone passes away with no spouse and no children, the estate goes to parents, then to siblings, then to more distant relatives, according to a specific legal order. If no relatives can be found, the property escheats to the state of Texas, meaning it becomes state property. This is an unlikely outcome but demonstrates why having a plan helps ensure assets go where someone wants them to go.

Intestacy also means the estate goes through probate, which is a formal court process. In Texas, probate can take several months to over a year, depending on the estate's complexity and whether anyone contests the distribution. During probate, the court supervises asset management, pays debts and taxes, and oversees distribution. This process is public, meaning anyone can view the details of the estate. Probate also involves court costs and potential attorney fees, which reduce the amount available to heirs.

For families who prefer privacy, flexibility in how assets are distributed, or faster transfer of property, creating an estate plan is generally preferable to relying on intestacy rules. Parents with minor children face particular reasons to plan, as intestacy does not address guardianship preferences for children.

Practical Takeaway: Understanding intestacy rules illustrates why having a plan—whether a simple will or a more comprehensive approach—helps ensure property goes to intended people and reduces uncertainty, cost, and delay for the family.

Probate Process in Texas and How to Minimize It

Probate is the legal process through which a court oversees the distribution of a deceased person's estate. In Texas, probate exists to verify that a will is valid, settle debts and taxes, and transfer property to heirs. Understanding how probate works in Texas helps explain why some people choose strategies to minimize or avoid it.

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Texas has two main types of probate: independent administration and dependent