Estate and gift tax planning in Texas
If you’re building wealth in Texas, understanding how estate and gift taxes work is essential—especially if you want to protect your assets for your family. Texas offers major tax advantages, but federal law still plays a big role in what happens to your estate.
Let’s break down what Texans need to know, step by step.
Texas Has No State Estate or Inheritance Tax
Here’s the biggest advantage of living (and planning your legacy) in Texas:
Texas does not impose a state-level estate tax or inheritance tax.
So when you pass assets to your heirs, the state won’t take a slice.
But there’s something even more important:
Texas Proposition 8 (on the November 2025 ballot)
This amendment would constitutionally prohibit Texas from ever implementing an estate or inheritance tax.
If passed, it officially locks in Texas as one of the most tax-friendly states for generational wealth planning.
Because Texas doesn’t tax estates, the entire focus shifts to:
- Federal estate and gift tax rules
- Texas community property laws
- Strategic planning tools like trusts
Federal Estate & Gift Tax Rules for 2025
Even though Texas doesn’t tax your estate, the federal government still might—depending on the size of your assets.
Understanding the Federal Exclusion Amount
The federal estate and gift tax system uses a unified exclusion amount. This is the total value you can pass on during life or at death tax-free.
- 2025 Exclusion: About $13.99 million per individual
- Married couples: Roughly $27.98 million
2026 Update: A Big Opportunity
Starting January 1, 2026, the exclusion increases to $15 million per person.
This increase gives high-net-worth Texans a rare opportunity to transfer more wealth tax-free before future legislation changes it again.
Using the Annual Gift Tax Exclusion
One of the easiest ways to reduce your future taxable estate is through tax-free annual gifting.
- 2025 limit: You can gift $19,000 per person
- Married couples: Can gift $38,000 per recipient through gift-splitting
This means you can transfer wealth every year, without filing a gift tax return, and without reducing your lifetime exclusion amount.
Why this matters:
Any assets you gift today—and all their future appreciation—stay out of your taxable estate forever.
Texas Community Property: A Hidden Wealth Advantage
Texas is one of only nine community property states, and this gives Texans a unique estate planning benefit.
The Full Step-Up in Basis
In Texas, most assets acquired during marriage are considered jointly owned.
When a spouse passes away:
- The entire property receives a step-up in basis to its fair market value at the date of death.
This can dramatically reduce capital gains taxes if the surviving spouse decides to sell.
Example:
If a couple bought a home for $300,000 and it’s worth $750,000 when the husband passes away, the home’s new cost basis becomes $750,000—not $300,000.
If the surviving spouse sells shortly after, there’s little to no capital gains tax owed.
This is one of the most powerful tax advantages available to Texas families.
Using Trusts to Protect and Transfer Wealth
If your estate is close to the federal exclusion limit, trusts can help you reduce or eliminate estate taxes.
Common strategies include:
Grantor Retained Annuity Trust (GRAT)
Allows you to transfer appreciating assets—such as business shares or investment portfolios—at a significantly reduced gift tax cost.
Irrevocable Life Insurance Trust (ILIT)
Keeps life insurance proceeds outside your taxable estate, providing tax-free cash to your heirs without increasing your estate size.
These tools “freeze” the value of your estate for tax purposes, while shifting future growth to the next generation.
Probate, Homestead Protections & Trusts in Texas
Texas has a relatively simple probate process, but many families choose:
Revocable Living Trusts
to avoid probate delays, maintain privacy, and ensure assets transfer smoothly.
Your primary residence also comes with strong protections:
Texas Homestead Exemption
This shields your home from most creditors and plays an important role in asset protection planning.
Why This Matters for Texans
Estate and gift tax planning isn’t only for ultra-wealthy families. It’s about:
- Protecting the assets you’ve worked hard for
- Making life easier for your family
- Avoiding unnecessary taxes
- Ensuring your wishes are honored
With the federal exclusion at historic highs and Texas offering unmatched property advantages, now is the perfect time to plan.
Conclusion
Generational wealth doesn’t happen by accident—it requires intentional planning and the right strategy. Understanding how federal estate taxes, Texas community property laws, and annual gifting rules work together is essential to preserving more of what you’ve built. If you’re unsure whether your estate plan is fully optimized or whether you’re taking advantage of all the tax benefits available in Texas, partnering with an experienced CPA can make all the difference.
At Guerrero CPA, we can help you analyze your estate, maximize tax savings, structure trusts and gifting strategies, coordinate your tax and legal planning, and ensure full compliance with both Texas and federal law.
📞 Call: 210-490-7100
🌐 Visit: guerrerocpa.com
For wills, trusts, and legal estate planning documents, visit our legal partner:
👉 Guerrero Law PLLC – guerrerolawpllc.com