During estate planning, families may seek to protect as much of their wealth as possible to pass on to the next generation. However, Forney families planning their estates should understand how estate taxes could affect their loved ones under a proposed plan. Many families may wonder whether Texas has an inheritance or other estate taxes.
Texas Has No Estate or Inheritance Tax
Texas imposes neither an estate nor an inheritance tax on the distribution of estate assets after a person’s death. Estate taxes are taxes imposed on a deceased person’s estate, paid by the estate before it can distribute assets to a decedent’s heirs and beneficiaries. Inheritance taxes are taxes an heir or beneficiary must pay on the portion of a decedent’s estate they inherit.
Texas law once imposed an inheritance tax, but the state legislature repealed it over a decade ago.
2025’s Proposition Eight
In the 2025 general election, Texas voters approved Proposition 8, a measure that proposed an amendment to the Texas Constitution. The amendment prohibits the state legislature from imposing taxes on a decedent’s assets or on the transfer of any portion of an estate, inheritance, legacy, succession, or gift. As a result, the Texas Constitution now bars the state legislature from imposing any estate or inheritance tax. Thus, Forney families engaging in estate planning can plan with the understanding that Texas will not impose an estate or inheritance tax in the future.
The Federal Estate Tax in 2026
Unlike Texas, the federal government does impose an estate tax. However, federal tax law grants a substantial exemption for federal estate taxes. Under legislation recently passed by Congress and signed by the President, the federal estate tax exemption has been set at $15 million for 2026, with automatic increases indexed to inflation moving forward.
For estates that exceed the exemption, federal tax law imposes a progressive tax rate of up to 40 percent on the amount that exceeds the exemption. However, federal law allows a surviving spouse to claim the unused portion of their deceased spouse’s federal estate tax exemption, potentially giving married couples a total federal estate tax exemption of $30 million starting in 2026.
Although most Forney families have estates well below the federal estate tax threshold, families who own businesses or other substantial assets (such as sizeable real estate) may face federal estate tax liability when a loved one passes away.
Other Taxes That May Affect Inheritances
Forney families may face other potential tax liabilities when a loved one passes away, such as:
- A decedent’s final taxes: A decedent’s estate must pay taxes on income the decedent earned before their death.
- Out-of-state property: Some states impose estate or inheritance taxes, which may apply to property a loved one owns in those states.
- Income tax on inherited retirement accounts: An heir’s or beneficiary’s withdrawal from an inherited traditional retirement account counts as ordinary income for tax purposes.
- Capital gains taxes: Although heirs and beneficiaries get a “stepped-up” basis in capital assets (e.g., real estate) equal to the value on the date of the original owner’s death, selling those assets later can still trigger a smaller amount of capital gains tax.
- Property taxes: Heirs and beneficiaries who inherit real estate must pay property taxes, as the decedent’s exemptions may automatically terminate upon death.
Contact Our Estate Planning Law Firm Today
Although Texas does not have estate or inheritance taxes, other tax liabilities could affect a family’s inheritance after a family member’s death. Contact Guest & Gray today for a free consultation with a Forney estate planning attorney to learn more about the potential taxes your family could face after a loved one’s passing.
