Estate Tax Planning Lawyer in Houston, Texas

Quick Answer

Estate tax planning is about making the most of the wealth you’ve worked to build and determining how it can be transferred to the next generation as efficiently as possible. The right strategy can help reduce potential estate tax exposure while coordinating trusts, gifting strategies, business interests, and other assets with your broader estate plan.

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The most expensive number in any high-net-worth Houston family’s life is 40%. That’s the federal estate tax rate on every dollar of an estate that exceeds the federal exemption — currently $15 million per individual, $30 million per married couple, indexed for inflation. For a Texas family that crosses the threshold, every $1,000,000 above the exemption costs the next generation $400,000 unless somebody planned for it.

The good news is that Texas has no state estate tax and no state inheritance tax. The federal exemption is now permanently set at the higher level under the One Big Beautiful Bill Act of 2025, which removed the uncertainty that had driven so much rushed planning in the years leading up to the now-canceled 2026 sunset. The bad news is that the underlying issues haven’t gone away — appreciating businesses, family real estate portfolios, retirement accounts, life insurance proceeds, and long-held investments can still cross the threshold faster than families expect. And the exemption is “permanent” only in the sense that it doesn’t have a built-in sunset; future Congresses can change it.

For Houston families with $5 million or more in net worth — or who expect to cross that line as a business grows or property appreciates — estate tax planning is the work of structuring wealth transfer so that what gets to the next generation isn’t 60 cents on the dollar.

Your Legacy Legal Care® has been doing this work for Houston families for over 25 years. We coordinate with CPAs, financial advisors, and the family’s other professionals to design and implement plans that are technically sound, family-appropriate, and built to outlast changes in law. The firm holds the Houston Chronicle’s Best Trust & Estate Law Firm award and operates from five offices across Greater Houston.

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What Is the Federal Estate Tax Exemption in 2026?

Under the One Big Beautiful Bill Act, signed into law in July 2025, the federal estate, gift, and generation-skipping transfer tax exemption is $15 million per individual and $30 million per married couple, effective January 1, 2026. The exemption is indexed for inflation beginning in 2027.

The federal estate tax rate above the exemption remains 40%. The annual gift tax exclusion for 2026 remains $19,000 per recipient — the amount any individual can give to any other individual each year without using any of the lifetime exemption.

The OBBBA exemption is “permanent” in the sense that it does not contain a sunset provision the way the Tax Cuts and Jobs Act of 2017 did. It can still be changed by future legislation — Congress retains the authority to amend the rules — but the immediate “use it or lose it” pressure that drove so much rushed gifting in 2024 and early 2025 has been removed.

For families that already used a substantial portion of their lifetime exemption before the OBBBA passed, the higher 2026 exemption means additional tax-free transfer capacity opening up on January 1, 2026. We have worked with Houston clients through all phases of this — pre-OBBBA “use it or lose it” planning, post-OBBBA strategy resets, and now planning for the next exemption-indexing window.

Does Texas Have an Estate Tax?

No. Texas has no state estate tax and no state inheritance tax. The Texas Constitution and the state’s tax code do not impose either tax — Texas was one of several states that allowed its state-level estate tax to expire when the federal “pickup tax” was phased out in 2005, and it has not been reinstated.

That makes Texas one of the more favorable estate planning jurisdictions in the country for high-net-worth families. The federal estate tax is the only transfer tax most Texans face. Texas families also benefit from:

The unlimited Texas homestead exemption, which protects the family home from most creditors regardless of equity value. Texas’s broad statutory exemptions for retirement accounts, life insurance, and a defined list of personal property under Texas Property Code §42. The state’s lack of an income tax, which makes certain trust structures more tax-efficient when the trust’s situs and beneficiaries are in Texas.

The combined effect is that high-net-worth Houston families typically face a planning landscape where the work is focused on federal transfer tax minimization rather than juggling state and federal regimes the way families in California, New York, Massachusetts, or Illinois have to.

What Triggers a Federal Estate Tax Liability?

The federal estate tax is calculated on the value of everything the deceased owned or controlled at death — the “gross estate” — minus deductions, with the federal exemption then applied to whatever remains.

The gross estate includes more than most families realize:

• Real estate the deceased owned outright or jointly. The full date-of-death fair market value, not the basis the deceased had in the property.
• Cash, bank accounts, brokerage accounts, mutual funds, ETFs, individual stocks, and bonds owned by the deceased.
• Retirement accounts (IRAs, 401(k)s, 403(b)s, pension lump sums) at full value, even though the beneficiary will pay income tax on them as well — creating a “double tax” problem unique to retirement assets.
• Life insurance proceeds, if the deceased owned the policy at death (or controlled it within three years of death). This is one of the most commonly missed inclusions — life insurance is income tax free to the beneficiary, but it’s not automatically estate-tax free.
• Business interests — corporate stock in closely held businesses, partnership interests, LLC membership interests — at fair market value, often with valuation discounts for lack of control or marketability.
• Trust interests the deceased had control over, including assets in revocable living trusts, certain interests in irrevocable trusts where the grantor retained powers, and assets transferred within three years of death in some circumstances.
• Personal property — vehicles, jewelry, collectibles, art, household furnishings, equipment.
• Annuities owned by the deceased.
• Powers of appointment the deceased held.
• Gifts made within three years of death, in certain circumstances, are added back to the estate.

For Houston families with significant business interests, real estate portfolios, retirement accounts, and life insurance, the gross estate can be much larger than the family thinks — sometimes triggering tax liability the family didn’t anticipate.

What Estate Tax Planning Strategies Work for Houston Families?

The toolkit for federal estate tax minimization is well-established. The right combination depends on the family’s wealth level, asset composition, ages, and goals.

• Lifetime gifting using the annual exclusion. Each individual can give $19,000 per year to any other individual without using any lifetime exemption. A married couple with three children and three children-in-law can move $114,000 per year out of the estate this way. Sustained over 20 years, that’s $2.28 million in transferred wealth — none of it counted against the lifetime exemption, all of its appreciation removed from the taxable estate.
• Lifetime gifting using the lifetime exemption. Substantial gifts during life remove not just the current value but also all future appreciation from the taxable estate. A $5 million gift today of an asset that doubles in value over 20 years removes $10 million from the taxable estate, even though it only used $5 million of exemption. For appreciating assets — early-stage business interests, growth-oriented investments, family real estate — the math is powerful.
• Irrevocable Life Insurance Trusts (ILITs). Life insurance owned by an ILIT rather than by the insured personally keeps the death benefit out of the taxable estate. For Houston families using life insurance to fund estate liquidity (paying estate taxes, equalizing inheritances, funding business buy-sell agreements), the ILIT structure is essential.
• Grantor Retained Annuity Trusts (GRATs). A short-term irrevocable trust funded with appreciating assets, structured so the grantor receives an annuity stream for a fixed period and the remainder passes to beneficiaries with little or no gift tax cost. Particularly powerful for assets expected to appreciate above the IRS’s hurdle rate.
• Intentionally Defective Grantor Trusts (IDGTs). An irrevocable trust that’s outside the grantor’s estate for transfer tax purposes but treated as the grantor’s for income tax purposes. The grantor’s payment of the trust’s income tax is a non-gift transfer that further reduces the estate.
• Sale to a defective trust. Often paired with an IDGT — the grantor sells assets to the trust in exchange for a promissory note, removing the assets and their future appreciation from the estate while creating an income stream the grantor can use during life.
• Family Limited Partnerships and family LLCs. Allow gifts of non-voting interests at discounts for lack of control and marketability, while keeping the parents in operational control as managing members. Workhorse for closely held Texas family businesses and family real estate portfolios.
• Generation-skipping trusts and dynasty trusts. Use the GST exemption (also $15 million per individual under OBBBA) to shelter wealth from estate tax at multiple generations. A single $15 million transfer to a properly structured dynasty trust can theoretically grow tax-free for generations, depending on the rule against perpetuities in the trust’s situs state.
• Spousal Lifetime Access Trusts (SLATs). An irrevocable trust funded by one spouse for the benefit of the other, removing assets from both spouses’ estates while preserving indirect family access. Particularly effective for couples below the combined exemption who want to “lock in” exemption use.
• Charitable structures. Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs) for families who want to combine philanthropy with significant tax efficiency. Donor-Advised Funds for ongoing charitable giving with current deductions.
• Qualified Personal Residence Trusts (QPRTs). Transfer the family home or vacation home to children at significantly discounted gift tax cost.
• Coordination with business succession structures. For Houston families whose wealth is largely in a closely held business, the estate tax plan and the succession plan are the same plan.

The right combination for any specific family is built around the actual asset mix, the family’s goals, and the available time. A family with 25 years to plan can use a different toolkit than a family with five.

When Houston Families Need Estate Tax Planning

The triggers we see most often:

The combined family net worth is at or approaching $10 million for an individual or $20 million for a married couple. The math gets serious well below the $15M/$30M exemption because of growth — assets appreciating at 6% annually double in 12 years.

A family business is approaching a sale, an IPO, or a generational transition that will significantly increase liquid wealth. A real estate portfolio has appreciated substantially. A founder has built a business that’s now worth eight figures. A windfall — a stock-option exercise, a litigation recovery, an inheritance — has materially changed the family’s tax exposure.

A spouse has died and the surviving spouse needs to elect portability of the deceased spouse’s unused exemption (which requires filing Form 706 even when the estate is below the filing threshold). One of the most expensive missed steps in surviving-spouse estate planning is failing to file a portability election — it can leave $15 million of unused exemption on the table.

The family wants to make significant lifetime gifts now to remove future appreciation from the estate, even though current values are below the exemption. This is the play that sustained estate planners spent 2024 and early 2025 implementing for the now-canceled sunset, and it remains the right play for many families who want to lock in exemption use against future legislative changes.

A trust drafted under earlier tax law may need updating. Plans drafted before 2017 often included formulas that allocated specific dollar amounts to “credit shelter” or “bypass” trusts based on then-current exemptions. With the exemption now $15 million, the same formula language can produce dramatically different results than the family intended.

Why Houston Families Choose Your Legacy Legal Care®

Estate tax planning at the high-net-worth level is the practice area where the gap between technical correctness and actual family outcomes is widest. The IRS rules can be implemented in ways that minimize tax brilliantly while creating family conflict that destroys relationships across generations. Or they can be implemented in ways that respect the family dynamics, the next generation’s readiness, the parents’ continued role, and the way the family actually wants wealth to function in their kids’ and grandkids’ lives.

We do both halves of the work. We have been planning for Houston families through every major change in federal transfer tax law over the last two decades — the 2001 Bush exemption increases, the 2010 estate tax repeal-and-restoration, the 2012 portability rules, the 2017 TCJA doubling, and the 2025 OBBBA permanent extension. The plans we draft today are designed to work across whatever the next change brings.

The firm holds the Houston Chronicle’s Best Trust & Estate Law Firm award and operates from five offices across Greater Houston: Clear Lake, the Galleria, Katy, Bay City, and Sugar Land. Most planning engagements are quoted as a flat fee in writing before the work begins, with implementation costs (trust funding, business interest valuations, tax return preparation) addressed separately.

Schedule an Estate Tax Planning Strategy Session →

Five offices serving the Greater Houston area and clients across Texas.

Houston Estate Tax Planning FAQ

What Is the Federal Estate Tax Exemption for 2026?

Under the One Big Beautiful Bill Act of 2025, the federal estate, gift, and generation-skipping transfer tax exemption is $15 million per individual and $30 million per married couple effective January 1, 2026. The exemption is indexed for inflation starting in 2027. The exemption does not contain a sunset provision, meaning it remains in place until Congress affirmatively changes it.

Does Texas Have an Estate or Inheritance Tax?

No. Texas has no state estate tax, no state inheritance tax, and no state gift tax. The federal estate tax is the only transfer tax most Texans face. This makes Texas one of the more favorable jurisdictions in the country for high-net-worth estate planning.

What Is the Federal Estate Tax Rate?

40% on every dollar of an estate that exceeds the federal exemption. The rate is flat above the exemption, meaning a $1 million estate above the threshold incurs $400,000 in federal estate tax.

What Is the 2026 Annual Gift Tax Exclusion?

$19,000 per donor, per recipient, per year. A married couple can effectively give $38,000 per recipient per year using gift-splitting. Annual exclusion gifts do not count against the lifetime exemption and do not require a gift tax return (Form 709) when they don’t exceed the per-recipient limit.

What Happens to the Exemption When the First Spouse Dies?

The deceased spouse’s unused exemption can be transferred to the surviving spouse through “portability” — but only if the executor files a federal estate tax return (Form 706) and elects portability. The election must be made even when the estate is below the filing threshold, and missing the election can permanently forfeit $15 million or more of unused exemption. We file portability elections as a routine part of trust administration for surviving spouses.

What Is the Generation-Skipping Transfer Tax?

A separate federal transfer tax that applies to transfers (during life or at death) to “skip persons” — typically grandchildren and more remote descendants. Designed to prevent families from avoiding estate tax at the children’s generation by leaving assets directly to grandchildren. The GST exemption is $15 million per individual under OBBBA, aligned with the estate and gift tax exemption.

Can I Avoid Federal Estate Tax Entirely?

For estates below the $15 million individual or $30 million married exemption, generally yes — with proper planning. For estates above the exemption, the goal is usually to minimize the tax exposure on the excess through lifetime gifting, trust structures, valuation discounts, charitable planning, and coordination with the family business and life insurance. Outright “avoidance” is rarely realistic for very large estates; minimization is.

Are Life Insurance Proceeds Taxable in Texas?

Life insurance proceeds are not subject to federal income tax in the hands of the beneficiary (they pass income-tax-free). They are potentially subject to federal estate tax if the deceased owned the policy at death — which is why high-net-worth Houston families typically own significant life insurance through an Irrevocable Life Insurance Trust (ILIT) rather than personally. Texas has no state estate tax, so the only tax concern is the federal estate tax.