Thinking about taxes on what you leave your family can feel unsettling, especially when you hear headlines about changing estate tax laws and rising home values. You have worked for decades to build a home, retirement accounts, and maybe a business, and the idea that a portion might go to taxes instead of your children or grandchildren raises real concern. At the same time, the rules feel technical and distant from everyday life in Katy.
Many families in Fort Bend and Harris Counties have heard that Texas does not have an estate tax and assume that means they never need to think about estate taxes at all. Others believe estate taxes only affect very wealthy families, not people with a house in Katy or Cinco Ranch and healthy retirement savings. In reality, federal rules apply nationwide, and growing asset values can bring more families into the conversation than they expect, especially as laws change over time.
At Theander & Grimes, PLLC, our Katy-based practice focuses on estate planning and elder law for local families. We regularly sit down with clients to review their homes, retirement accounts, life insurance, and business interests and help them understand whether federal estate tax exposure is a real concern in their situation. In this guide, we share how we think about estate taxes for Katy families and what practical steps you can take to protect what you have built.
Why Estate Taxes Still Matter for Katy Families
Texas does not impose its own state estate tax or inheritance tax. That fact often leads people to believe that estate taxes are simply not an issue here. The federal government, however, has its own estate tax that can apply to the total value of what you own at death, regardless of where in the United States you live. If your taxable estate exceeds a federal exemption amount, the portion above that level can be subject to federal estate tax.
At the moment, the federal exemption is relatively high, so many families in Katy are not immediately facing an estate tax bill. The key detail that often gets overlooked is that this exemption is not fixed forever. Congress has changed it many times before, and current federal law includes future changes that could reduce the exemption. A family that seems comfortably below the threshold today could be much closer if the exemption drops and their assets continue to grow over time.
Estate tax planning is not only for families who know they are far above federal limits. It is also about reducing uncertainty and preserving flexibility. We work with many couples who own a home in Katy or Fulshear, have solid retirement savings, and carry life insurance for income protection. They may not owe estate tax today, but they want to understand how close they are to possible exposure, what might change over the next decade, and what options they have if their estate grows faster than expected.
Thinking about estate taxes through this lens helps shift the conversation from fear to planning. Instead of worrying about distant rules, you can get a clear picture of where you stand and whether you might need to adjust your will, trusts, or beneficiary designations over time. Our role is to translate federal concepts into everyday terms and show Katy families how those rules intersect with their real assets and goals.
What Counts in Your Taxable Estate in Katy
A common surprise for people is learning what actually counts as part of their taxable estate. Many think only about their home and a few accounts they use regularly. For federal estate tax purposes, the government looks at the total value of almost everything you own or control at the time of your death. That includes both assets that pass through probate and assets that pass directly to a beneficiary outside of probate.
Typical assets in Katy that can make up a taxable estate include your primary residence, any vacation or rental property, retirement accounts such as 401(k)s and IRAs, brokerage and savings accounts, and interests in a closely held business or family company. Life insurance can also be included, depending on who owns the policy and how it is structured. Jointly owned property and payable-on-death or transfer-on-death accounts are counted too, even if they bypass the probate court.
It helps to distinguish between probate and non-probate assets. Probate assets are those that pass under your will through the local probate court in Fort Bend County or Harris County. Non-probate assets pass by contract or title, such as accounts with named beneficiaries or property held in a revocable living trust. For federal estate tax calculations, the IRS asks about the total picture, not just what goes through probate. That means your estate for tax purposes often looks larger than what your family thinks of as “the estate going through court.”
Consider a realistic example. A Katy couple may own a home worth several hundred thousand dollars in a neighborhood like Cinco Ranch or Firethorne, have a combined 401(k) and IRA balance in the high six figures, hold brokerage accounts, and maintain life insurance for income replacement. Add in a small business interest or rental property, and the total value can reach seven figures faster than many expect. Understanding how these pieces add up is the first step in judging whether estate taxes might ever come into play.
When we meet with clients, we start by organizing an inventory of assets in plain language, not tax jargon. We ask where accounts are held, how they are titled, and who the beneficiaries are. This allows us to give a realistic sense of the taxable estate and highlight areas where changes in ownership, beneficiary designations, or insurance structure might make a meaningful difference down the road.
How Federal Estate Tax Rules Apply to Texas Residents
Federal estate tax law applies the same basic framework to residents of every state, including Texas. The central idea is the federal estate tax exemption. This is the amount you can transfer at death before any federal estate tax would be due. Only the value of your taxable estate above that exemption is potentially taxed, and there are separate rules for how the tax is calculated on that excess amount.
The exemption has been raised and lowered several times over the years, and under current law it is scheduled to decrease in the future unless Congress acts again. That planned reduction is one reason families in growth areas like Katy should pay attention, even if they are not close to the current numbers. A home that appreciates, retirement accounts that continue to grow, and a thriving business can all increase the size of an estate significantly over a decade or two.
Married couples also need to understand how federal rules handle transfers between spouses. Property that passes outright to a surviving United States citizen spouse is generally not subject to federal estate tax at the first death, due to what is commonly called the marital deduction. In some situations, a surviving spouse can also benefit from any unused portion of the federal exemption from the first spouse to die, a concept often referred to as portability. These concepts are powerful but they are not automatic in every situation and can depend on how documents are drafted and how tax returns are handled.
The important takeaway is that estate tax planning is not something you do once and then forget. Because the rules and exemption levels change, a plan that made perfect sense for a Katy family ten years ago may not be aligned with current law or the family’s current asset mix. When we review estate plans, we look not only at the will or trust documents, but also at key federal estate tax concepts like exemption use, marital transfers, and how non-probate assets are positioned.
Our job is to track the legal landscape so you do not have to. We pay attention to scheduled changes to the federal exemption and other relevant rules, then explain to clients when those changes might matter for them. That way, Katy residents can make informed decisions about whether they need to update existing plans, consider additional planning tools, or simply monitor their situation and revisit it at key life stages.
Common Estate Tax Myths We Hear in Katy
Because federal estate tax concepts can feel abstract, many people build their understanding around short statements they have heard from friends or media. Some of these ideas are partially true in limited situations, but they often miss important details. Over the years, we have noticed a few recurring myths in conversations with families in Fort Bend County and Harris County that can lead to costly misunderstandings.
One common myth is, “Texas does not have estate taxes, so I never need to think about this.” It is true that Texas has no separate estate or inheritance tax. It is not true that this eliminates federal estate tax. The federal rules look at your taxable estate without regard to your state of residence. If your estate grows large enough, or if future law reduces the exemption, federal estate tax can still come into play for a Katy family, even though there is no state-level tax layer.
Another myth is, “Estate taxes only affect the ultra-wealthy, not families with a house and retirement accounts.” In a region where home prices and retirement savings have steadily grown, that assumption can be risky. A couple who bought a modest home in Katy twenty years ago may now own a much more valuable property, on top of retirement accounts that increased over time and life insurance intended to protect their family. Even if they remain comfortably below the current federal threshold, they could be close to a future, lower threshold. Seeing a realistic snapshot of your total estate is much more reliable than relying on a label like “middle class.”
A third myth is, “A simple will or an online form automatically protects my family from taxes.” Estate tax exposure is driven by your overall asset picture and how assets are titled and structured, not just by whether you have a will on file. A basic form will might direct who inherits probate assets, but if your largest accounts pass by beneficiary designation and your documents do not coordinate with those designations, you might unintentionally concentrate too much value in one place. That can undermine both your family goals and any tax planning your documents were meant to accomplish.
We address these myths in a direct but respectful way by tying them back to real life. Many Katy families we meet have followed advice that seemed reasonable at the time, such as naming a single child as beneficiary “to make things easy,” without realizing the long-term effects. In our meetings, we walk through how each assumption plays out with their actual accounts and documents, so they can see for themselves where adjustments could make a significant difference.
Planning Strategies That Can Reduce Estate Tax Exposure
Once you understand what counts in your taxable estate and how federal rules work, the next question becomes what, if anything, you should do about it. There is no single solution that fits every Katy family. Instead, we look at a toolbox of planning strategies and match them to each client’s goals, asset mix, and comfort level. The goal is not just to reduce possible estate taxes, but to do so in a way that preserves family relationships and practical control.
One broad category of strategies involves lifetime gifting. Rather than waiting to pass everything at death, some families choose to transfer portions of their wealth during their lifetimes. Smaller annual gifts can gradually move value out of a future taxable estate while also letting you see your children or grandchildren benefit. Larger lifetime transfers may also be appropriate in some circumstances, though they can affect how federal estate and gift tax exemptions interact. Because these rules are complex and closely tied to individual circumstances, we encourage planning in consultation with both legal and tax advisors.
Trusts are another key tool in estate tax planning. Certain trust structures can hold assets for the benefit of a spouse or children while making better use of each spouse’s federal exemption. For example, some families use a trust arrangement to allow a surviving spouse to have access to income and sometimes principal, while ensuring that part of the first spouse’s exemption is fully used and preserved for the next generation. Other trust types can be used to manage how and when children receive assets, which can be especially valuable when combining families, protecting a family business, or caring for a beneficiary who may not be ready to manage a large inheritance.
Coordinating beneficiary designations and account ownership with the overall plan is just as important as drafting the right documents. Retirement accounts, life insurance, and transfer-on-death accounts all pass according to the forms on file with financial institutions, not the terms of your will. If those designations are inconsistent with your tax planning, they can accidentally concentrate value in one person’s hands or bypass trusts that were intended to manage tax exposure. Reviewing and updating these designations is a straightforward but often overlooked step.
At Theander & Grimes, PLLC, we do not approach these tools as products that everyone needs. We talk with Katy families about what they want their legacy to look like, how comfortable they are with making lifetime gifts, who in the family needs protection, and whether there is a business or special asset that should be preserved. From there, we recommend tailored combinations of gifting, trusts, and beneficiary coordination that align with both federal tax rules and family dynamics.
How Estate Tax Planning Connects With Probate and Elder Law
Estate taxes are only one piece of the larger estate planning puzzle. The same assets that might create estate tax exposure will also be affected by probate, guardianship, and long-term care decisions. Treating estate tax planning as an isolated project can create conflicts later, particularly for aging couples or families with a member who has significant care needs.
Probate in Fort Bend County and Harris County is generally manageable when documents are well drafted, but it still involves legal steps to transfer probate assets to heirs. Some families use trusts and beneficiary designations to minimize what goes through probate. Those choices need to be coordinated with estate tax strategies so that the overall plan works as intended. For example, shifting substantial assets into a revocable living trust may streamline administration but does not on its own remove assets from a taxable estate.
Medicaid and long-term care planning bring another layer of complexity. Families concerned about future nursing home costs sometimes consider making gifts or changing ownership to protect assets. Those moves can affect both Medicaid eligibility rules and federal estate and gift tax calculations. A transfer that seems helpful for one purpose can create penalties or unintended tax results if the timing or structure is not carefully considered.
We regularly see Katy families wrestling with several issues at once. A couple may own a successful small business, have one spouse facing declining health, and hold significant retirement accounts and real estate. They want to protect the healthy spouse, plan for possible long-term care, and consider whether their overall estate could trigger federal taxes in the future. Our work in estate planning, guardianship, Medicaid, and probate lets us look at all these needs together and design a coordinated approach instead of separate, conflicting plans.
By addressing estate taxes, probate, and elder law concerns as parts of the same conversation, we help families avoid strategies that solve one problem while creating another. That integrated view is especially valuable when you are making decisions that affect multiple generations, such as business succession or how to provide for a child who may need support long after you are gone.
When Should Katy Families Review Their Estate Tax Exposure
Even if you are not currently close to federal estate tax thresholds, there are natural points in life when it makes sense to pause and review your estate structure and potential tax exposure. Waiting until a health crisis or just before death usually leaves fewer options and creates unnecessary stress for family members who are already overwhelmed.
Major life events are strong signals that a review is appropriate. Buying or significantly upgrading a home in Katy, inheriting assets from a parent, starting or selling a business, or receiving a large bonus or settlement can all change your asset picture. Retirement is another major trigger. As you shift from accumulation to distribution, required minimum distributions, Social Security, and other income decisions can affect how and where wealth accumulates for the next generation.
Changes in family structure also matter. Marriage, divorce, remarriage, births, and deaths can all alter who should inherit, who should manage funds, and who might be affected by estate taxes. A plan that made sense when children were young may not fit as they become adults with their own families, or when you start spending more time helping an elderly parent in Katy or nearby communities.
Before meeting with an attorney, it helps to gather a simple list of your assets and debts, along with copies of any existing wills, trusts, and beneficiary designations. This does not need to be perfect or in formal accounting format. A straightforward list with approximate values and ownership information gives us enough to start a meaningful conversation. During our meetings at Theander & Grimes, PLLC, we guide clients through questions in a structured way so they do not feel they must have everything figured out in advance.
Reviewing estate tax exposure is not a one-time task. For many Katy families, checking in every few years or after major life changes is sufficient. These periodic reviews help ensure that your documents, asset structure, and family goals remain aligned with both current law and your evolving circumstances.
Talk With a Katy Estate Planning Attorney About Your Estate Tax Picture
Federal estate tax law may feel distant and technical, but its impact is very real when it intersects with a lifetime of work and savings. For most Katy families, the first step is not a complex tax strategy. It is gaining a clear, realistic view of their total estate, understanding how federal rules could apply over time, and seeing how wills, trusts, and beneficiary choices can work together to protect the people they care about.
At Theander & Grimes, PLLC, we focus our practice on estate planning and elder law for families in Katy and throughout Fort Bend County and Harris County. We take time to listen to your concerns, review your assets, and explain your options in everyday language, so you can make informed decisions about estate taxes, probate, and long-term care.
If you are ready to understand your estate tax picture and explore planning strategies that fit your family, we invite you to contact our office to schedule a consultation.