Navigating the loss of a loved one is difficult, and figuring out the financial aftermath only adds to the stress. If you are handling an estate in Texas, understanding Texas estate tax filing requirements is one of your first priorities. The most important thing to know right away is that Texas does not collect a state-level estate tax or an inheritance tax. However, this does not mean you are completely free from tax obligations. The federal government still requires executors to file specific returns if the deceased person's total assets cross a certain threshold. Knowing exactly what to file and when helps you avoid penalties and keeps the probate process moving smoothly.

Does Texas collect a state estate or inheritance tax?

Unlike several other states, Texas does not impose a tax on the transfer of wealth after someone passes away. Beneficiaries do not owe money to the state simply for receiving property, cash, or investments. You also will not find any specific state estate tax return to file with the Texas Comptroller. When reviewing general state-level inheritance rules, families often find relief in knowing their share of the estate will not be reduced by state taxes.

When does an estate owe federal taxes?

Even without a state tax, the IRS steps in for high-net-worth individuals. You must file a federal estate tax return (IRS Form 706) if the gross estate exceeds the federal estate tax exemption limit. For deaths occurring in 2024, that threshold is $13.61 million. The gross estate includes everything the deceased owned or had an interest in at the time of death, such as real estate, bank accounts, life insurance policies, and business interests.

For example, if a Texas resident passes away leaving behind a family ranch valued at $10 million, a stock portfolio worth $4 million, and a $1 million life insurance policy, their gross estate totals $15 million. Because this exceeds the current exemption limit, the executor must address these federal tax filing obligations, even though the state of Texas will not ask for a cut.

What is a portability election?

Sometimes, an estate is well below the $13.61 million threshold, but the surviving spouse might want to preserve the deceased spouse's unused exemption amount. In this case, the executor can choose to file Form 706 anyway to make a portability election. This legally transfers the unused exemption to the surviving spouse, potentially saving the family millions in future taxes when the second spouse passes away.

What paperwork is required to settle the estate?

Settling an estate involves more than just tax returns. You have to gather necessary probate paperwork to validate the will and appoint an executor. Once appointed, the executor must inventory the assets, pay valid debts, and distribute the remaining property. This legal process requires filing the correct documents with the local probate court to ensure the distribution is legally binding and protected from future disputes.

What mistakes do executors often make?

Handling an estate is complex, and errors can lead to personal liability for the executor. A frequent mistake is missing the filing deadline. IRS Form 706 is due exactly nine months after the date of death. While you can request a six-month extension, you must submit the request before the original nine-month deadline passes.

Another common error is undervaluing assets or forgetting to include property located outside of Texas. If the deceased owned a vacation home in Colorado, its value counts toward the federal gross estate limit. Accurately managing the financial duties of the estate requires keeping meticulous records and often hiring a professional appraiser to determine the fair market value of real estate and business interests.

How do you file the federal return?

Executors must file IRS Form 706 directly with the Internal Revenue Service, not the state of Texas. You can find the current form, instructions, and mailing addresses on the official IRS website. The form requires detailed schedules listing real estate, stocks, bonds, mortgages, and other assets, along with deductions for funeral expenses, debts, and unpaid mortgages.

Next steps for Texas executors

If you are responsible for settling a Texas estate, use this practical checklist to stay on track:

  • Locate the will: Find the original document and prepare to file it with the county probate court within 30 days of death.
  • Calculate the gross estate: Add up all assets, including out-of-state property and life insurance payouts, to see if you exceed the federal exemption limit.
  • Obtain an EIN: Apply for an Employer Identification Number from the IRS to open an estate bank account and file final tax returns.
  • Consult a CPA: If the estate is near or over the federal threshold, hire a tax professional to prepare Form 706 and advise on portability elections.
  • Pay debts and taxes: Settle outstanding credit cards, medical bills, and final income taxes before distributing any remaining assets to the beneficiaries.