The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal issue, including those whose questions are addressed here, should consult an attorney for personalized advice on their specific circumstances.
Whether you like the “Big Beautiful Bill” or not, it has resolved an important estate tax issue. Before the Big Beautiful Bill (BBB), the Federal estate tax exemption set by the Tax Cuts and Jobs Act of 2017 was scheduled to sunset on December 31, 2025. However, the BBB has raised the Federal estate tax exemption amount to $15,000,000 per individual, and $30,000,000 for a married couple. This is a significant change to some folks' estate plans.
Very few folks have an estate worth more than $15,000,000 (or $30,000,000 for a couple). Texas does not have a separate estate tax or income tax. Thus, most estates in Texas can be handled through a well-written Last Will and Testament.
If you own a business, real estate, farm, or ranch, this increase to the Federal estate tax exemption amount is important to your estate. When considering the value of businesses, real estate, houses, equipment, investment or savings accounts, vehicles, and cattle, an exemption amount lower than $10,000,000 could pose a problem.
Before the estate exemption amount was increased, the use of the marital deduction trust clause or family limited partnership was the norm for estate planning among families with substantial assets. These marital deduction trusts were commonly used prior to 2001, when the Federal estate tax exemption limit was $600,000.00.
Another beneficial planning tool is to gift a portion of your cash into a trust that purchases a life insurance policy on you, a parent, or a grandparent. That policy is then owned by the trust, and upon the death of the grantor, the policy pays into the trust at a rate of two to ten times the size of the original gift. TAX-FREE. Zero tax. Yes, not one penny to Uncle Sam. In fact, that could leave your family with enough to pay the estate tax and give generously to charities and foundations that you love, as well as provide additional resources for your loved ones.
Along with an increase in the estate tax exemption amount, the annual exclusion for gifts was raised to $19,000 per individual in 2025 and will remain in effect for future years. Parents and grandparents may prefund a child’s education through 529 accounts or pay tuition on behalf of another directly to the school or other educational provider. If you are only paying tuition, the exemption is limited to tuition fees and does not cover other educational expenses. Other options include paying medical expenses, utilizing lifetime gifts, and making charitable donations.
In addition to the Federal estate tax exemption, you should pay close attention to the Federal capital gains tax. This is a tax levied on the appreciation of real property and investment accounts. To ensure that your family does not have to pay any capital gains tax, transferring property subsequently after your death is important. When property is transferred during your life, the gift tax amount is not the only consideration. By gifting property during your lifetime, you could cause your beneficiary to be in a situation that results in the payment of capital gains taxes of up to 20% of the gain.
Many people are enticed into creating living trusts or revocable trusts. However, you should meet with an attorney experienced in estate planning to see what is the best vehicle for your estate planning needs in your state. They should also discuss with you the importance of powers of attorney (financial and medical), advance directives (aka living wills), and the other associated documents to make sure those you trust are empowered to assist you without putting your assets at risk (i.e., Do NOT list them on your accounts).
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas © www.moakandmoak.com