Corporations & Inheritance Law in Texas

Texas has fewer taxes than most states, but inheriting a corporation can result in taxes owed.

Texas, a community property state, has no state inheritance or gift tax. However, Texas does require a state inheritance tax return for those who died between September 1, 1983, and December 31, 2004, even though the state collected no inheritance or estate tax.

Inheriting from a Spouse

If a person in Texas starts a corporation while married, that person' spouse owns half of the corporation. Upon her death, the percentage owned by the deceased person goes to the surviving spouse unless otherwise specified by her will.

Inheritance Law and Children

If one spouse inherits a corporation or stake in the business from one or both of his parents, it does not become part of the community property. Instead, Texas considers the business the property only of the inheriting spouse. However, that spouse can choose to establish joint ownership of the inherited property with the person or people of his choice.

Inheritance Law and Taxes

Texas does not levy a state inheritance or gift taxes. However, the federal inheritance and gift tax rates apply if a corporation is part of an inheritance or gift, respectively. If a person gives her stake in a corporation to someone else during her lifetime to avoid inheritance taxes, for example, the recipient owes federal gift taxes.

References

• "The Complete Idiot's Guide to Wills and Estates"; Stephen Maple; 2009
• "Legal Forms for Starting & Running a Small Business"; Fred S. Steingold; 2010
• "The Executor's Guide: Settling a Loved One's Estate or Trust"; Mary Randolph; 2010
• "How to Probate and Settle an Estate in Texas"; Karen Ann Rolcik; 2005

Resources

• Window on State Government: Your Estate Under Texas Law
• "8 Ways to Avoid Probate"; Mary Randolph; 2010