Federal estate taxes can take up to 40% of a taxable estate — and for Denton County families with a home, retirement accounts, life insurance, and business interests, the numbers can add up faster than expected. While Texas imposes no state estate tax, federal exposure is real. Here’s what the 2026 rules look like and what you can do about it.

The 2026 Federal Estate Tax Exemption

The federal estate and gift tax exemption is the amount you can transfer — during your life or at death — without owing federal tax. For 2026, the exemption is $15,000,000 per individual, or $30,000,000 for a married couple using portability. Amounts above that threshold are taxed at rates up to 40%.

The annual gift tax exclusion for 2026 is $19,000 per recipient. A married couple can give $38,000 per recipient per year without touching their lifetime exemption.

Why This Matters in Denton County

Denton County sits within one of the most economically dynamic regions in the country. Add rising home values, investment portfolios, retirement accounts, life insurance, and business interests, and many families find the total value of what they’ve built is more substantial than they might expect — and worth protecting with a thoughtful plan.

Consider a couple with a home worth $750,000, $2 million in investment accounts, $1.5 million in retirement accounts, $1 million in life insurance, and a small business valued at $2 million. That estate totals $7.25 million — well within the current exemption, but potentially within reach if the law changes or the estate continues to grow.

Texas Has No State Estate Tax

One clear advantage of living in Texas: there is no state estate tax, inheritance tax, or gift tax. In November 2025, Texas voters approved constitutional amendments permanently prohibiting any future state-level estate tax, inheritance tax, gift tax, and capital gains tax — locking those protections directly into the Texas Constitution. All estate tax exposure for Texas residents comes from the federal system.

Key Planning Strategies for 2026

Annual Gifting

You and your spouse can give $38,000 per year to each child, grandchild, or other recipient — completely tax-free. For families with multiple children and grandchildren, systematic gifting can meaningfully reduce a taxable estate over time. Gifts can be cash, appreciated stock, or business interests.

Irrevocable Trusts

Unlike a revocable living trust, an irrevocable trust removes assets from your taxable estate permanently. Common structures include the Irrevocable Life Insurance Trust (ILIT), which keeps life insurance proceeds out of your estate; the Spousal Lifetime Access Trust (SLAT), which moves assets out of both spouses’ estates while retaining some indirect access; and the Charitable Remainder Trust (CRT), which provides lifetime income while reducing your taxable estate.

Portability Election

When a married person dies, their unused exemption can transfer to the surviving spouse — but only if Form 706 is filed within five years of death, even when no tax is owed. For Denton couples currently below the exemption threshold, preserving portability is an important safeguard against future law changes.

Business Valuation Discounts

For Denton business owners, a privately held business is often the largest estate asset. Minority interests in a family limited partnership or LLC can sometimes be valued at a discount for estate tax purposes, reflecting that a partial interest in a closely held business is worth less than its pro-rata share. Done correctly and documented properly, this is a powerful planning tool.

Inherited IRA Planning

With the inherited IRA 10-year withdrawal rule now in full enforcement, naming the right beneficiary on retirement accounts matters more than ever. Naming a trust or your estate as an IRA beneficiary risks a 5 year withdrawal rule unless very technical requirements are met. It is safer to create a retirement plan trust to ensure the 10 year withdrawal rule. Your estate planning attorney can review your designations and ensure they’re structured correctly.

Why Acting in 2026 Matters

Estate and tax laws can always change through future legislation, and no exemption amount is guaranteed permanently. Having a plan in place now means you’re positioned to respond quickly if the rules shift — and ensures your family is protected under the current favorable environment regardless of what comes next.

Frequently Asked Questions

Does Texas have an estate or inheritance tax?

No. Texas has no state estate tax, inheritance tax, or gift tax. All estate tax exposure for Texas residents is federal.

When is an estate tax return required?

IRS Form 706 is required if the gross estate exceeds the applicable exemption. Even when no tax is owed, filing may be advisable to preserve the portability election for a surviving spouse. The return is generally due nine months after death, with an automatic six-month extension available.

Can a living trust reduce estate taxes?

A revocable living trust doesn’t reduce federal estate taxes on its own — those assets remain in your taxable estate unless there is a bypass or exemption trust for the benefit of the surviving spouse. However, trusts are a core tool in estate tax planning. Irrevocable trusts, properly structured, can remove assets from your taxable estate and significantly reduce federal exposure.

Concerned about how the 2026 tax landscape affects your estate? Leigh Hilton PLLC is here to help you plan with confidence. Our offices in Denton, Bartonville, and Aubrey are ready to welcome you. Call us at 940-387-8800, or reach out through our website and we will be in touch to schedule a time to meet.