Chris Thompson, CEPF® MAY 06, 2022
Texas does not impose a state inheritance or estate tax. Most of its laws surrounding inheritance are straightforward. However, if you die without a will, the distribution of your assets will be left up to the state’s intestate succession process. Sorting an estate or inheritance can be complicated, but a financial advisor could help you create an estate plan for your family’s needs and goals.
No. There are no inheritance or estate taxes in Texas. The state repealed the inheritance tax beginning on Sept. 1, 2015.
That said, you will likely have to file some taxes on behalf of the deceased, including:
- Final individual federal and state income tax returns: Each are due by the tax day of the year following the individual’s death.
- Federal estate/trust income tax return: Due by April 15 of the year following the individual’s death.
- Federal estate tax return: Due nine months after the individual’s death, though an automatic six-month extension is available if asked for prior to the conclusion of the nine-month period. This is required only of individual estates that exceed a gross asset and prior taxable gift value of $12.06 million in 2022.
To file any of these estate-based returns, you’ll need to apply for an employer identification number (EIN) with the IRS. You can do this online, fax or via mail.
Dying With a Will in Texas
If you leave a testate will following your death, you’ve clearly and completely laid out in writing exactly what you want done with your estate. This includes the naming of an executor or personal representative for the estate, heirs to your property and legal guardians for children under 18. It also means the creation of any testamentary trusts, which handle bequests to a beneficiary if the decedent doesn’t want that person to receive those assets until a specified time. In Texas, having a testate will means it will almost always be executed exactly as you wish. Therefore, inheritance laws really only apply to people who died without a valid will.
For estates greater than $75,000, the probate process goes into action to ensure that the will of the deceased is executed as it was meant to be. The court appoints the executor who was named in the will to manage the estate. This involves not only protecting and distributing the decedent’s assets, but also taking care of his or her debts and liabilities.
Any estate worth less than $75,000 is not required to go through the court. Instead, after 30 days have passed since the individual’s death, heirs can file a small estate affidavit with the court that has jurisdiction over the estate. Following approval by the court, heirs can use this affidavit to acquire property from the estate.
Estates with no will or a will that has not been probated by the Texas courts within four years of the deceased’s death can be inherited via the use of an affidavit of heirship. Someone with knowledge of the decedent and his or her family, as well as a public notary, must sign the document to transfer the estate to the decedent’s heirs at law. As far as vehicles are concerned, a separate affidavit of heirship is available through the Texas Department of Motor Vehicles.
Dying Without a Will in Texas
Dying without a valid will leaves the distribution of assets up to the intestate succession process of the state of Texas. Even a decedent’s valid will can be considered intestate if it cannot disperse all estate property (possibly because of a beneficiary’s death or other extenuating circumstance) or if other parties have successfully contested the will. Unfortunately, even the will of a decedent who passes away with the belief that things have been fully taken care of can have his or her will considered invalid by the court after the fact.
In turn, an intestate will, because it has little to no pre-specified direction, is inherited by some combination of the deceased’s spouse, children and/or relatives. To differentiate between your belongings and whom they should go to, Texas divides them into community property and separate property.
Community Property in Texas Inheritance Law
If you’re married, any property you received during your marriage is considered community property and is therefore jointly owned by you and your spouse. However, inheritances and gifts acquired during your marriage do not automatically become community property. Commingling an inheritance or gift in a joint bank account with your spouse can void personal property rights, though, and turn the assets into into community property.
Separate Property in Texas Inheritance Law
Separate property belongs solely to you and is split between personal and real property. Personal property consists of items that are not literally fixed to the ground, like cash, vehicles, investments and memorabilia. Land and anything fixed to it, such as a homestead, is real property.
Spouses in Texas Inheritance Law
In Texas, you don’t have to go the traditional marriage route to be considered married by the state. It recognizes common law marriages and therefore will afford your common law spouse inheritance rights even if there’s no marriage license attributed to your relationship. To achieve a common law marriage in Texas, you must agree to be married with your spouse, have represented yourselves as married to others and have lived together in the state.
All community property will be left to your surviving spouse if all of your children are his or hers as well. But if one or more of your children are not from your surviving spouse, Texas will afford your community property to the children.
In this situation, Texas deals with separate property differently. The state divides separate personal property between your spouse and your children, with two thirds afforded to all the children and the leftover one third going to the spouse. Separate real property is divvied out in the same manner, but once the surviving spouse dies, real property is transferred to the children.
The laws in Texas surrounding intestate wills for married individuals without children are much simpler. The surviving spouse automatically receives all community property. Separate personal property also goes completely to the surviving spouse, while separate real property is split down the middle between the surviving spouse and the deceased’s parents, siblings or siblings’ descendants, in that order. If there are no surviving parents, siblings or descendants of siblings, the spouse gets the remainder of the estate’s separate real property.