If you have accumulated a significant amount of wealth over your lifetime, you may worry that your heirs will only see a fraction of it thanks to state and federal estate taxes. The good news is that Texas is one of 38 states that no longer tax the estates of deceased residents. However, your estate may still be subject to the federal estate tax and other taxes. SmartAsset explores what types of taxes you should anticipate the state and federal governments to levy on your estate.
An estate tax, which many refer to as the “death tax,” is a tax a government body levies on the estate of a recently deceased individual. The government taxes the estate before the money and assets pass to the heirs. This tax typically only applies to estates that obtain a certain value.
As already mentioned, Texas does not levy an estate tax. The federal government, however, does. If your estate is worth $11.18 million, or $22.36 million if you take proper legal steps to combine your half of your estate with your spouse’s, your estate is subject to estate taxes. The rate at which the government will tax your estate depends on how much wealth you accumulated, and how much you left unprotected by an asset protection trust or some other estate planning vehicle.
For instance, if the value of your estate is between $1 and $10,000 over the $11.18 million threshold, the taxation rate is 18%. However, if the value of your estate exceeds the threshold by $100,000 to $150,000, the taxation rate is 30%. The maximum taxation rate on estates is 40%, which the government will levy on estates with a value that exceeds the threshold by $1,000,000.
Texas also does not have an inheritance tax, which is a tax states levy on the money you gift. However, like with the estate tax, gifts are still subject to the federal inheritance tax. If you gift a gift with a value of more than $15,000, the federal government will tax it.
It is important to note that these numbers are current as of 2019. This information is not meant to serve as legal advice. It is for informative purposes only.