How Recent Federal Tax Law Changes Affect Estate Planning in Texas

As control of the federal government changes, sometimes every two years, the tax laws often change as well. Recently, new tax laws have gone into effect, which may significantly affect many Texans’ management of their assets and estate. A recently released legal trade publication discusses some of the recent tax changes and how they may affect your estate planning.

The most significant changes to tax law that involves estate planning involve adjustment of the estate tax and the gift tax. As of 2023, the combined exemption amount from the gift and estate taxes has increased by nearly $ 1 million. With the new tax numbers, single persons are now entitled to give or pass on to their heirs up to $12,920,000 without incurring any estate or gift tax burden. A married couple can exempt $25,840,000 in this same manner.

This change may affect how some Texans construct and manage their estate because trusts, non-liquid holdings, and other financial measures may not be necessary to reduce the tax burden of your heirs upon your death. The exemption is the highest it has ever been and is set to reduce in 2026. With proper advice and counsel, Texans with significant assets may be able to arrange a “lifetime gift” to an heir, locking in the favorable tax exemption while it is part of the law.

The new law also increases the gift tax exemption for transfers and gifts to non-family. The gift tax exemption has increased by $1000 from 2022. As a result of this gift tax increase, many people can adjust their estate plan and money management strategy to avoid increased tax burdens.

Additionally, the GST (generation skipping tax) exemption has also been increased. The GST is an estate tax that applies to funds gifted or inherited to any familial relationship that is more than one generation below the benefactor (a grandparent transferring assets to a grandchild, for example). The GST has been increased to $12,920,00, allowing more money to be transferred within a family without a tax penalty or burden. Importantly, the increase in the GST exemption is set to decrease to $5,000,000 in 2026, so savvy estate planners may want to contact a qualified Texas estate planning attorney to determine the optimal timing of transfers to minimize a family’s tax burden.

An Experienced Houston Estate Planning Attorney to Talk with About Your Tax Concerns

A properly managed estate plan can help a family save literally tens of millions of dollars compared to an intestate distribution of an estate through probate court. The cost of hiring a qualified Houston estate planning attorney is often minimal compared to the money saved based upon their advice. The Houston attorneys at McCulloch Miller, PLLC keep up-to-date knowledge of the relevant state and federal tax laws related to estate planning, and we modify our strategies to act in our clients’ best interests based on our knowledge. If you want to be sure your estate is managed with as little of a tax burden as possible, reach out and contact one of our attorneys today. Call a member of our team today at (713) 903-7879.


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