Mccullough & Mccullough

Estate Administration
& Probate

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What does out-of-state estate administration mean for taxes?

Some people move to Texas for retirement. Other times, family members spread out to other states as they become adults and start families of their own. Having generations of the family living in different locations will make socialization a bit more of a challenge. Those interstate relationships will also come into play when a family member dies.

Interstate estate administration can be more of a challenge than when the deceased party and all of their primary beneficiaries live in one state. Those who live the snowbird life, traveling back and forth between two states every year, have to file more complex income tax returns including both states where they reside. Will there be interstate tax complications when a testator and their beneficiaries live in separate states?

Texas doesn’t have estate taxes

When someone dies as a resident of Texas, Texas state law does not impose an estate tax on the property they leave behind nor an inheritance tax on what family members receive. There could be federal estate taxes to address if the estate is worth more than $12,060,000. Some people may worry that there could be cross-state inheritance taxes.

However, inheritance tax applies based on where the estate goes through probate. Even if a beneficiary lives in a state with an estate tax, the Texas probate laws are what apply. The exception to this rule involves real estate.

If a person who died in Texas and whose estate goes through Texas probate leaves you real property located in a state with inhertiance taxes, those taxes may apply to what you receive. Real estate in Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania could trigger inheritance taxes even if the testator lived in Texas and the beneficiaries don’t live in those states.

Out-of-state executors may require support

Trying to handle estate administration is a challenge in any situation, but it can be especially difficult when you don’t live in the state where probate proceedings will take place. An executor from another state trying to manage probate proceedings for someone who lived and died in Texas will need to learn about Texas law and partner with a Texas attorney if they don’t want to have to be physically present for every hearing and meeting regarding probate administration.

Understanding the liabilities that affect Texas estate will make probate proceedings easier for families to manage, even if there are interstate complications.

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