Estate planning remains a critical tool for managing wealth and ensuring a smooth transfer of assets to beneficiaries.

In 2025, changes to federal estate and gift tax exemptions, coupled with evolving legal and financial landscapes, have made it more important than ever to understand how taxes influence estate planning strategies.

“Because [the federal estate tax] can have a significant effect on your beneficiaries, it’s best to plan for it in your estate plan if you think your estate may trigger it,” says SmartAsset.

Understanding the Federal Estate Tax

Texas residents do not have to worry about state-level estate taxes as the Lone Star State does not levy such a tax, but there is a federal estate tax.

What is the federal estate tax?

“The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death,” says the IRS.

Here are some things to know about this tax:

• The fair market value of the items in your estate is used, not necessarily what you paid for them or what their values were when you acquired them.
• The total of all these items is your "Gross Estate."
• The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.
• Once you have accounted for the Gross Estate, certain deductions (and in special circumstances, reductions to value) are allowed in arriving at your "Taxable Estate."
• These deductions may include mortgages and other debts, estate administration expenses, property that passes to surviving spouses and qualified charities. The value of some operating business interests or farms may be reduced for estates that qualify.
• After the net amount is computed, the value of lifetime taxable gifts (beginning with gifts made in 1977) is added to this number and the tax is computed. The tax is then reduced by the available unified credit.

“Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return,” says the IRS. “A filing is required if the gross estate of the decedent, increased by the decedent’s adjusted taxable gifts and specific gift tax exemption, is valued at more than the filing threshold for the year of the decedent’s death.

Federal Estate Tax: Key Updates for 2025

The federal estate tax applies to estates exceeding a certain threshold, which has increased to $13.99 million per individual in 2025, up from $13.61 million in 2024.

Married couples can combine their exemptions for a total of $27.98 million.

Estates valued above these thresholds are subject to progressive tax rates, with the highest rate set at 40 percent for amounts exceeding $1 million over the exemption.

Here is the full federal estate tax rates for 2025:

Potential Changes in 2026

Unless Congress acts, the federal estate tax exemption will revert to approximately $7 million per individual in 2026 due to the expiration of provisions under the Tax Cuts and Jobs Act (TCJA) of 2017.

“The wealthiest people in the U.S. could see major tax hikes next year, sending high-net worth clients to financial planning offices around the country to try to get around them, their money managers say,” Fortune reported in March 2025 about the possible estate tax change.

This looming reduction underscores the importance of proactive estate planning in 2025.

"This is the number one issue that’s looming large in peoples’ minds," Nita Viyas, trust counsel and managing director at Fiduciary Trust International told Fortune.

Gift Tax Exclusion: Increased Limits

For those looking to avoid triggering the federal estate tax, gifting is a way to transfer wealth before it goes into your estate.

The annual gift tax exclusion has risen to $19,000 per recipient in 2025, up from $18,000 in 2024. This yearly amount gifted does not count against a person’s lifetime gift tax and estate combined exemption.

This allows individuals to transfer wealth gradually without triggering gift tax liabilities.

Lifetime gift tax exemptions align with the estate tax exemption at $13.99 million per individual, enabling significant tax-free transfers during one’s lifetime.

Note: gifts above the annual exclusion ($19,000) require filing Form 709 but don't necessarily trigger immediate tax payment.

Texas-Specific Considerations

Texas remains one of 38 states without state-level estate or inheritance taxes, simplifying estate planning for residents. However, federal taxes still apply to estates exceeding the exemption thresholds.

Those states with estate taxes: Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington.

Texas is a community property state which means that assets acquired during marriage are owned jointly by both spouses.

If someone dies without a will in Texas, their property will be distributed according to Texas law (known as intestate succession) to their closest relatives with the probate court appointing an administrator to manage the estate.

New Trends and Strategies in Estate Planning

Estate planning is evolving beyond traditional approaches. Here are some emerging strategies and considerations for 2025:

Leveraging Increased Exemptions

• Lifetime Gifting: High-net-worth individuals should consider utilizing their increased lifetime exemption amounts before potential reductions in 2026. This can help remove future appreciation from taxable estates.
• Spousal Limited Access Trusts (SLATs): SLATs remain popular for preserving wealth while providing financial security for spouses. Careful funding is essential to avoid IRS scrutiny.

Planning for Retirement Accounts

New rules for inherited IRAs require beneficiaries to take minimum distributions based on life expectancy if the original owner passed after their required beginning date (RBD). Strategic beneficiary designations can minimize tax burdens.

Digital Assets and Legacy Planning

As technology advances, digital assets such as cryptocurrency and online accounts are becoming integral parts of estate plans. Proper documentation ensures these assets are transferred smoothly.

Charitable Giving

Charitable donations not only support causes but also reduce taxable estates. Donor-advised funds and charitable trusts are effective tools for maximizing philanthropic impact while minimizing taxes.

Common Estate Planning Tips

To ensure your estate plan aligns with your goals and minimizes tax liabilities:

• Create or update your will.
• Explore trusts for asset protection and probate avoidance.
• Review beneficiary designations on retirement accounts and insurance policies.
• Plan strategically for charitable giving.
• Communicate your plans with beneficiaries to avoid confusion or disputes.

Why Act Now?

With significant changes expected in 2026, 2025 presents a unique opportunity to leverage increased exemptions and implement long-term strategies. Consulting with an experienced estate planning attorney or financial advisor is essential to navigate these complexities effectively.

For personalized guidance tailored to your needs, contact B Sloan Law today to discuss your estate planning goals and ensure your legacy is protected.