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Are there estate taxes that apply to a Texas estate?

There is a saying that the only certainties in life are death and taxes. After someone with substantial personal property dies, those two certainties may intersect, much to the confusion of their family members.

Estate taxes, sometimes called death taxes, can diminish the value of the property that someone leaves behind for their loved ones when they die. The total value of someone’s assets when their estate goes through probate court determines if they have to pay these taxes. The more property someone has in their name when they die, the bigger the risk that estate taxes will apply.

There are also inheritance taxes that someone must pay based on the value of what they inherit. If someone that you love recently died in Texas with an estate subject to Texas probate laws, will there potentially be estate taxes that affect your inheritance or the estate administration process?

Texas does not levy a state estate tax

Residents of Texas who died will not have to worry about the Lone Star State taxing their assets posthumously. Texas does not assess either an estate tax or an inheritance tax. However, estates probated in Texas are often still subject to federal estate taxes.

If an estate has an overall value of $11.7 million or more, then federal estate taxes will apply. The greater the value of the estate, the higher the tax rate. The maximum federal rate for estate taxes is a shocking 40% tax, making it important that those with significant assets plan ahead.

Are there other tax responsibilities for an estate?

Estate taxes aren’t the only possible liabilities associated with the probate process. An executor will typically have to file a last income tax return on behalf of the deceased taxpayer.

In fact, they may even need to file an income tax return for the estate itself if their obligations include the liquidation of certain assets. Selling real estate, a business or even personal property will likely produce more than $600 worth of profit, which will result in an obligation to file an income tax return for the estate.

Understanding what tax liabilities apply to an estate can potentially help you plan your own estate or better manage the probate process.