Your Estate Under Texas Law
The information in this publication applies to estates of those who die on or after September 1, 1983.
As of that date, the personal representative of an estate (usually an executor or administrator) is responsible for paying any taxes that are due. Provisions of the law that automatically imposed a lien on an estate's assets were repealed as of September 1, 1983.
The requirements for filing a state inheritance tax return match federal requirements for filing an estate tax return.
Please note that no state inheritance return is required on estates with a date of death on or after January 1, 2005.
Decedent means the person who is deceased.
Domicile means that place where a person has a true, fixed and permanent home and principal establishment and to which, whenever absent, one has the intention of returning. A person does not have to be a United States citizen to be domiciled in Texas.
Resident means a decedent who was domiciled in Texas at the time of his or her date of death.
Nonresident means a decedent, other than an alien decedent, who was not domiciled in Texas at the time of his or her death.
Alien means a decedent who, at the time of his or her death, was not domiciled in Texas or any other state of the United States and was not a citizen of the United States.
Federal and State Filing Requirements
The requirements to file a state inheritance tax return have matched federal requirements since September 1, 1983.
The gross value of an estate is determined by totaling all the assets a decedent owned (as of the date of death) without deducting any debts that he or she may have owed nor deducting any allowable expenses that may have been incurred by the estate.
As of the dates of death shown below, state and federal returns must be filed regardless of any tax owed, if the value of the gross estate equals or exceeds the amount identified:
Effective Date Gross Estate Value September 1, 1983 $275,000 January 1, 1984 $325,000 January 1, 1985 $400,000 January 1, 1986 $500,000 January 1, 1987 $600,000 January 1, 1998 $625,000 January 1, 1999 $650,000 January 1, 2000 $675,000 January 1, 2002 $1,000,000 January 1, 2004 $1,500,000
Inheritance Tax Returns and Payments
If a United States Estate Tax Return (IRS Form 706) does not have to be filed, a Texas Inheritance Tax Return (Comptroller Form 17-106) is not required.
A Texas Inheritance Tax Return must be filed with the Comptroller, along with any tax due, no later than nine months after the date of death, unless the Comptroller's office approves an extension to file and/or pay. A request for an extension of time to file and/or pay the Texas Inheritance Tax Return must be postmarked by the original due date.
The United States Estate Tax Return must accompany any Texas Inheritance Tax Return filed with the Comptroller.
A Texas Inheritance Tax Return must be filed for the estate of every decedent whose date of death was on or after September 1, 1983, and up to December 31, 2004, if:
- a United States Estate Tax Return must be filed; and
- a decedent was at the time of death a Texas resident, a nonresident with property taxable in Texas or an alien with property taxable in Texas.
For Texas residents with property located outside of Texas, furnish copies of all inheritance tax returns filed outside of Texas and proof of payment (i.e., copy of cancelled check or receipt).
Computing the Tax
State inheritance tax due to the State of Texas is computed on the United States Estate Tax Return (IRS Form 706), where it is reflected as the "Credit for State Death Taxes." The federal estate tax due is reduced by the amount paid to the State of Texas.
To compute the credit for state death tax: Reduce the Federal taxable estate by $60,000 and use the Tax Tables which are included in the United States Estate Tax Return (IRS Form 706) instructions.
Property Taxable in Texas
- Texas Resident
- Includes real property and oil and gas interests located in this state whether or not held in trust, tangible personal property having an actual situs in this state and all intangible personal property, wherever the notes, bonds, stock certificates or other evidence, if any, of the intangible personal property may be physically located or wherever the banks or other debtors of the decedent may be located or domiciled. A partnership interest is also an intangible asset regardless of where the physical assets of the partnership are located. Real property in a personal trust is not taxed if the real property is located outside of this state.
- Includes real property and oil and gas interests located in this state, whether or not held in trust, and tangible personal property having an actual situs in this state. Intangibles of a nonresident are not taxable in this state.
- Includes real property and oil and gas interests located in this state whether or not held in trust, tangible personal property having an actual situs in this state and intangible personal property if the physical evidence of the property is located within this state or if the property is directly or indirectly subject to protection, preservation or regulation under the laws of this state, to the extent that the property is included in the decedent's gross estate.
An estate's personal representative (usually an executor or administrator) is responsible for any taxes due. The representative is personally liable for any tax due on assets transferred before the tax has been paid. If assets are transferred before taxes have been paid, beneficiaries will also be responsible for paying delinquent taxes.
Banks, savings and loans, credit unions, insurance companies, oil companies and any other institutions holding property of a deceased depositor, royalty owner or policy owner may transfer such assets without the Comptroller's consent.
When acting as an agent of a deceased person, a corporation, bank, stock transfer agent, safe deposit institution or other person possessing the deceased person's property is not liable for any state inheritance tax, penalty or interest that may be due on such property.
For estates of decedents with a date of death on or after September 1, 1983, the statutory lien imposed on all estate assets at the date of death has been repealed. Lien releases (waivers) for a statutory lien are not necessary and will not be issued for estates with a date of death on or after September 1, 1983.
The Texas Inheritance Tax Receipt (Comptroller Form 17-339) issued when an estate is closed will serve as proof that taxes have been paid.
- Extensions to Pay
- For inheritance tax due before July 21, 1987, if the due date for paying the federal estate tax is extended by the IRS, then the state inheritance tax shall be due and payable on the date specified by the IRS.
For inheritance tax due on or after July 21, 1987, the state tax is not extended when the payment of the federal estate tax is extended; however, if the federal estate tax is extended, an estate may submit a written request for an extension from the Comptroller postmarked by the original due date.
The amount of each state inheritance tax payment must be at least in the same proportion to the total state inheritance tax liability as the federal estate tax payment is to the total federal estate tax liability. In addition, the state inheritance tax payment is due at the same time the federal estate taxes are due or the federal estate tax payment is made, whichever is earlier.
Example: If the total liability is $100,000, the federal estate tax liability is $80,000, and the Texas inheritance tax liability is $20,000. The estate pays the IRS $40,000 (50 percent of federal liability) and receives an extension for the remainder. Then the estate also must pay Texas at least $10,000 (50 percent of state liability) at the same time.
Copies of any request made to the IRS for extension to file the tax return and/or pay the tax should be sent to Texas at the same time the request is submitted to the IRS.
- Approved Extension
- Upon approval by the IRS, a copy of the approved extension should be furnished to Texas within 30 days of receipt.
- Denied Extension
- If denied by the IRS, a copy of the denial must be sent to the Comptroller and all tax and interest must be paid within 10 days from the date of denial to avoid a penalty.
- Extensions to File
- An estate may submit a written request for an extension to file the Texas Inheritance Tax Return, along with a copy of the IRS extension Form 4768 postmarked by the original due date.
If the IRS grants the estate an extension to file the United States Estate Tax Return, then the estate has the same period of time in which to file the Texas Inheritance Tax Return.
Penalty and Interest
- If any tax is not paid on or before the due date or approved extension date, a penalty of five percent of the unpaid tax is due and payable. If the tax is not paid within 30 days after the due date or approved extension date, an additional penalty of five percent of the unpaid tax is due and payable.
- Interest begins to accrue nine months after the date of death on any inheritance tax not paid regardless of extensions granted. Interest on payments made in installments is calculated on the total balance of the tax remaining unpaid.
When calculating interest, use the following rates:
- 10 percent per annum simple interest for due dates prior to September 1, 1991;
- 12 percent compounded monthly for due dates on or after September 1, 1991 through December 31, 1993;
- 12 percent per annum simple interest from January 1, 1994 through December 31, 1999 on all outstanding tax balances.
Closing an Estate
To close an estate, the estate representative must furnish a copy of the IRS closing letter or U.S. Court document within 30 days of the date of issuance.
Any additional tax plus interest must also be paid within 30 days of the IRS final determination or a ten-percent penalty will be assessed.
- Inheritance Tax Receipts
- The Texas Inheritance Tax Receipt (Comptroller Form 17-339) is issued to the estate after all the filing requirements have been met, all IRS documentation furnished and all taxes, interest and penalty have been paid.
- Certificates of No Tax Due
- A Texas Inheritance Tax Certificate of No Tax Due (Comptroller Form 17-340) is not issued for estates with a date of death on or after September 1, 1983.
- Probate Certificates
- Effective September 1, 1989, the law (TEX PROB. CODE ANN. sec 410) was changed to eliminate the requirement that the Comptroller's office approve probate certificates.
Effective September 1, 1989, probate certificates should not be sent to the Comptroller's office for approval.
United States Additional Estate Tax Under IRS Code Section 2032A
A copy of the United States Additional Estate Tax Return Form 706-A must be filed with the Comptroller.
A copy of the return and payment of tax arising from the disposition of property or failure to use property for a qualified use under Internal Revenue Code, Sec. 2032A, is due six months after the event which caused the additional tax to be imposed, unless an extension to pay has been granted.
Generation-Skipping Transfer (GST) Tax for Terminations
- Who Must File
- Beginning September 1, 1993, the trustee of any trust that has a taxable termination subject to the federal generation-skipping transfer (GST) tax must file a Texas Generation-Skipping Transfer Tax Return for Terminations (Comptroller Form 17-110).
The trustee must file the return to report the amount of the state GST tax credit allowable under Section 2604, Internal Revenue Code. The trustee is also responsible for paying any tax that is due when filing the return, unless the Comptroller's office approves an extension to file and/or pay.
If a federal Generation-Skipping Transfer Tax Return for Terminations [IRS Form 706-GS(T)] does not have to be filed, a Texas return is not required.
- Due Date
- Returns and payments are due by April 15 following the year in which the termination occurs.
No return is required on dates of death on or after January 1, 2005.
- Extension of Time to File
- The deadline for filing a Texas GST Tax Return for Terminations may be postponed if the IRS extends the deadline for filing the federal GST Tax Return for Terminations.
- Extension of Time to Pay
- Payment of the state GST tax for terminations may be postponed if the IRS and the State of Texas approve extensions for paying any federal and state GST taxes for terminations. If a partial payment is made to the IRS, a proportionate payment must be made to Texas.
- If any tax is not paid on or before the due date or approved extension date, a penalty of five percent of the unpaid tax is due and payable. If the tax is not paid within 30 days after the due date or approved extension date an additional penalty of five percent of the unpaid tax is due and payable.
- Interest begins to accrue one day after the due date on any unpaid tax regardless of extensions granted.
When calculating interest, use the following interest rate: 12 percent per annum simple interest for terminations occuring on or before December 31, 1998.
For terminations occuring on or after January 1, 1999, interest is calculated at the rate available on line at: <http://www.window.state.tx.us> or call toll free: 1-877-44RATE4.