Texas has neither an estate tax nor an inheritance tax. However, this does not mean that there are no taxes associated with administering an estate. In this blog post, we will give a quick introduction to the taxes that may effect your own estate, or the estate of your loved ones.
Estate and inheritance taxes
First, we should note the difference between an estate tax and an inheritance tax. An estate tax is paid by the estate of the deceased person. An inheritance tax is paid by the heirs. Some states have estate taxes and a few have inheritance taxes. Texas has neither.
The federal government has an estate tax, but it applies only to very large estates. In 2022, the federal estate tax applies only to estates of $12.06 million or more. The federal government does not have an inheritance tax.
Note that the estate taxes of other states may apply to some estates if the deceased owned property in other states.
If you are the executor or personal representative of an estate, even if you don’t have to deal with any estate taxes, you will have to deal with certain other taxes. These include the final individual federal and state income tax returns for the deceased. These are due on the tax day following the death.
Somewhat confusingly, you may also have to take care of the federal income tax for the estate itself. If a trust is involved, you will have to deal with the federal income taxes of the trust. These taxes cover the income the estate and/or trust have earned since the death, and are due by April 15 of the year after the death.
Extensions may be available in situations where you are unable to complete the returns by the deadline.
Help with estate administration
Many people who are appointed to oversee the administration of a loved one’s estate feel they are in over their heads. It can be valuable to have help from an attorney with experience in estate administration.