For Texas residents, protecting your family’s financial future is essential, and understanding how the federal estate tax works can play a significant role in your planning. One important concept that Texans should know about is the portability of the unused estate tax exemption between spouses. This provision can be a powerful tool to help preserve family wealth for generations as a Conroe, TX estate tax lawyer who has been with our firm since its founding in 2021 can explain.
What Is The Estate Tax Exemption?
The federal estate tax applies to the transfer of wealth from a deceased person to their heirs. However, not every estate is subject to this tax. In 2025, each individual has an estate tax exemption of $13.99 million. This means that if the total value of your estate is below this amount, no federal estate tax is owed.
For married couples in Texas, the combined exemption is $27.98 million, but taking full advantage of this amount requires careful planning. Portability is the rule that allows a surviving spouse to claim any unused portion of their deceased spouse’s exemption. This can be especially important for Texans who want to protect assets like family-owned ranches, businesses, or investments.
How Does Portability Work For Texans?
Imagine a Texas couple, John and Mary, who have worked hard to build a family legacy. John passes away first, leaving an estate worth $8 million. Since John’s estate is below the $13.99 million exemption, no federal estate tax is due, leaving $5.99 million of his exemption unused. Thanks to portability, Mary can “claim” that unused $5.99 million and add it to her own exemption.
Now, Mary’s total estate tax exemption is $19.98 million ($13.99 million from her own exemption plus $5.99 million from John). If Mary’s estate is valued at $18 million when she passes, no federal estate tax will be owed, ensuring that their hard-earned wealth stays within the family.
Steps For Texans To Claim Portability
For Texas families, claiming portability involves following these steps:
- File Within Nine Months: The executor of the deceased spouse’s estate must file Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, within nine months of death. An extension of six months can be requested if needed.
- Elect Portability: On Form 706, the executor must specifically elect portability to transfer the unused exemption to the surviving spouse.
- Keep Records: The surviving spouse should maintain records of the portability election, which will be needed when settling their own estate.
Why Is Portability Important For Texas Residents?
Portability offers significant advantages for Texas families who wish to preserve their wealth. Without portability, the unused exemption of the first spouse to pass away would be lost, potentially leading to higher estate taxes for the surviving spouse’s estate. For Texans who own valuable assets like ranches, oil and gas interests, or growing investments, this could result in a substantial tax burden for their heirs.
Additionally, portability allows Texas families to better prepare for the future. Over time, property values and other assets may appreciate significantly, increasing the risk of estate tax liability. By electing portability, Texans can secure the unused exemption and ensure they’re maximizing available tax benefits.
Limitations And Considerations For Texans
While portability is a powerful tool, it’s not without its limitations:
- Changes To Exemption Amounts: The federal estate tax exemption is subject to change. In 2026, the current $13.99 million exemption is scheduled to drop to approximately $6 million unless Congress acts. Texans should be mindful of this when planning.
- Texas-Specific Factors: While Texas doesn’t have a state estate tax, the value of family-owned properties and businesses can quickly add up. Comprehensive planning is essential to account for all assets.
- Complexity Of Filing: Filing Form 706 requires careful attention to detail, even if no estate tax is due. Many Texas families choose to work with an estate planning attorney or tax professional to ensure the process is completed correctly.
Alternatives To Portability For Texans
Portability isn’t the only option for reducing estate taxes. Texas families may also consider using trusts, such as credit shelter trusts or bypass trusts, to preserve the unused exemption. Trusts can provide additional benefits, including asset protection and greater control over how wealth is distributed to heirs. These are complex situations, so it is best to consult an attorney instead of risking doing your estate planning on your own.
However, portability is often simpler and more flexible for families who don’t need the added structure of a trust. Texas residents should work with an estate planning professional to determine which approach best suits their needs.
For Texas families, the portability of the unused estate tax exemption is an invaluable tool for reducing the estate tax burden and preserving wealth for future generations. By taking the right steps and making informed decisions, Texans can ensure that their hard-earned assets are protected and passed on to their loved ones. With this in place, your family will not need to worry about contacting a probate attorney either.
If you’re a Texas resident looking to secure your family’s financial future, consult an estate planning attorney who understands the unique needs of Texans. With the right plan in place, you can make the most of the opportunities provided by the estate tax laws and protect your legacy. Stuart Green Law, PLLC has been working on estate plans for families that protect their assets. We are licensed in Texas, Kentucky, Pennsylvania, and South Dakota, so contact us to get started today!