Various estate planning strategies, such as trusts, can help you and your family manage estate tax considerations when passing on your wealth after your death. Hiring experienced legal counsel can help you evaluate your options for mitigating the tax consequences of passing on your estate to your loved ones in Texas.
Understanding Estate Taxes in Texas
Texas does not have an estate or inheritance tax, meaning that your estate and your family will not owe taxes to the State of Texas after your death. However, for Texas residents who own property in other states that impose estate or inheritance taxes, their families may owe taxes on those assets.
However, Texas residents may incur federal estate taxes if their estate exceeds the federal estate tax exemption. The federal government charges a progressive tax ranging from 18 to 40 percent on the portion of a deceased person’s estate that exceeds the federal estate tax exemption. Beginning in 2026, the federal estate tax exemption will increase to $15 million, with future increases automatically indexed to inflation.
Federal tax law also allows for “portability” of the federal estate tax exemption between spouses. Portability allows a surviving spouse to claim the unused portion of their deceased spouse’s federal estate tax exemption. With proper tax planning, a married couple can combine their federal estate tax exemptions to preserve more of their family wealth.
Determining Whether Your Estate May Owe Federal Estate Taxes
To determine whether your estate may owe federal estate taxes, you must calculate the value of your gross estate, which will include the total value of your real estate holdings, investments, business ownership interests, and life insurance proceeds (if not subject to a beneficiary designation or life insurance trust). Individuals whose estates may exceed the federal estate tax exemption threshold may own complex assets that require independent valuation, such as high-value real estate or business ownership interests. As a result, having updated asset valuations can help individuals determine whether their estate may owe federal estate taxes, making tax planning an essential part of the estate planning process.
Strategic Lifetime Gifting
One common tool for mitigating estate taxes involves strategic lifetime gifting. Federal tax law allows individuals to make tax-free gifts to a person up to a specific annual threshold; as of 2026, an individual may make gifts worth up to $19,000 to a person. This annual gift exclusion applies on a per-recipient basis, meaning an individual can gift $19,000 to each family member in a tax year.
Gifts that exceed the annual gift exclusion may also avoid gift taxes by utilizing a portion of an individual’s federal estate tax exclusion; however, doing so will reduce their exclusion when calculating their estate’s tax liability after death. Nevertheless, strategic gifting can help move wealth to beneficiaries tax-free.
Using Trusts to Reduce Estate Taxes
Texas residents may also use irrevocable trusts to reduce estate tax liability. An irrevocable trust effectively removes assets from a person’s estate for tax purposes. In contrast, although revocable trusts allow individuals to pass assets outside the probate process, tax law typically counts those assets as part of the person’s estate for estate tax purposes.
Spousal Planning and the Marital Deduction
Federal tax law treats married couples as a single economic unit. As a result, spouses may transfer wealth between themselves during their lifetimes or at death without incurring federal gift or estate taxes. These rules, combined with the portability of the federal estate tax exemption, allow married couples to maximize exemptions that can help eliminate or reduce estate taxes.
Charitable Giving as a Tax-Reduction Strategy
Families can also mitigate tax liability through charitable giving strategies, such as the use of charitable trusts, which can provide tax credits from philanthropic giving while allowing families to use assets to provide an income stream or pass wealth on to succeeding generations.
Contact an Estate Planning Attorney Today
When you’ve spent your career building wealth, you may worry that taxes will reduce the money you leave behind for your family. Contact Carroll Law Group, PLLC today for a confidential consultation with a wills attorney to discuss your legal options for managing or mitigating estate taxes in Texas to ensure you can leave more of your hard-earned wealth to your loved ones.