How to Minimize Estate Taxes for High-Net-Worth Individuals in Texas

If you’ve worked hard to build wealth, you want to make sure as much of it as possible goes to your loved ones after you’re gone. But for high-net-worth individuals in Texas, estate taxes can take a big bite out of what you leave behind.

The good news is that with smart planning, you can reduce these taxes and protect more of your legacy. Let’s look at some ways to do this.

How Estate Taxes Work

First, it’s important to know what estate taxes are. These are taxes the government takes from your estate (everything you own when you die) before it goes to your heirs. The federal government charges these taxes, but Texas doesn’t have a state estate tax.

As of 2025, the federal estate tax only applies if your estate is worth more than $13.99 million. This amount is called the estate tax exemption. Anything over this amount gets taxed at 40%. That’s a big chunk!

Strategies to Minimize Estate Taxes

Now, let’s talk about ways to lower these taxes:

1. Give Gifts During Your Lifetime

One simple way to reduce your estate is to give away some of your wealth while you’re still alive. Each year, you can give up to $17,000 to as many people as you want without paying gift taxes. This is called the annual gift tax exclusion. Over time, this can significantly reduce the size of your estate.

2. Use Irrevocable Trusts

Irrevocable trusts are powerful tools for estate planning. When you put assets into an irrevocable trust, you’re removing them from your estate. This means they won’t be counted when calculating estate taxes. There are different types of irrevocable trusts, each with its own benefits:

• Irrevocable Life Insurance Trusts (ILITs): These hold life insurance policies. The death benefit isn’t included in your taxable estate, which can save a lot in taxes.
• Grantor Retained Annuity Trusts (GRATs): These let you transfer asset growth to your heirs with little or no gift tax cost.
• Charitable Remainder Trusts (CRTs): These support your favorite charities while also providing you with an income stream and tax benefits.

3. Take Advantage of Portability

Portability allows married couples to use any unused portion of their spouse’s estate tax exemption. This means a couple could potentially shield up to $27.98 million from estate taxes. To use portability, the executor of the deceased spouse’s estate must file an estate tax return, even if no tax is owed.

4. Consider a Family Limited Partnership (FLP)

An FLP is a type of business structure that can help reduce estate taxes. You can transfer assets into the FLP and then give partnership interests to family members over time. This can lower the value of your estate while still allowing you to control the assets.

5. Use Life Insurance Wisely

Life insurance payouts are usually tax-free to the beneficiary. By using an ILIT (mentioned earlier), you can keep the insurance payout out of your taxable estate. This provides your heirs with tax-free money to pay any estate taxes owed.

6. Make Charitable Donations

Giving to charity not only helps good causes, but it can also reduce your estate tax bill. You can make donations during your lifetime or leave money to charity in your will. Both can lower the amount of your estate that’s subject to taxes.

Start Planning Early

The key to minimizing estate taxes is to start the estate planning process early. Many of these strategies take time to set up and implement. Plus, the earlier you start, the more you can potentially save.

It’s also important to review your plan regularly. Tax laws can change, and your personal situation might change, too. What works best for you now might not be the best strategy in a few years.

Work with a Texas Estate Planning Attorney

Estate tax planning can be complex. It’s crucial to work with experienced professionals who understand the ins and outs of estate tax law. At The Cleverly Law Firm in Aledo, TX, we help high-net-worth individuals in Texas minimize their estate taxes.

We can help you create a personalized plan that protects your wealth and ensures your legacy goes to your loved ones, not to the government. Don’t leave your family’s future to chance. Contact us today to start planning for tomorrow.

Remember, with the right strategies, you can significantly reduce your estate tax burden. Your hard-earned wealth should go to the people and causes you care about most. Let’s work together to make that happen.