Planning for the future is essential for families across Texas, especially for those who want to protect their hard-earned assets and pass them down to future generations. A Generation-Skipping Tax (GST) Trust is a powerful tool that can help Texas families achieve this goal. With the 2025 federal estate tax exemption set at $13.99 million per person, Texans have a unique opportunity to secure their legacies. Our Houston, TX wills lawyer who has been with our firm since its founding in 2021 is here to share how a GST trust works and why it’s particularly beneficial for Texas residents.
What Is A Generation-Skipping Tax Trust?
A Generation-Skipping Tax Trust is a legal structure designed to transfer wealth to grandchildren or even great-grandchildren while avoiding certain taxes for everyone who has estate planning regardless of age. The trust is particularly valuable because it can help families bypass the Generation-Skipping Transfer Tax (GSTT), a federal tax that applies to transfers made to individuals at least two generations younger than the grantor.
The GSTT was created to prevent families from avoiding estate taxes by skipping a generation. However, with careful planning and the use of a GST trust, Texans can transfer wealth to younger generations without triggering this tax, as long as the transfers fall within the GST exemption limits.
Why Is A GST Trust Important For Texas Residents?
Texans often value family legacies, whether it’s a family ranch, a business, or other significant assets that have been built over generations. A GST trust aligns perfectly with these values by protecting wealth and ensuring that it benefits future generations.
Considerations For Texas Families
1. Property Values In Texas
Texas real estate values continue to rise, especially in cities like Austin, Dallas, and Houston. A GST trust can help families shield the appreciation of properties from being taxed when passed down to grandchildren.
2. Family-Owned Businesses And Ranches
Many Texans own businesses or ranches that they want to preserve for their descendants. A GST trust can provide a structured way to protect these assets and ensure they remain in the family.
3. Texas Law And No State Income Tax
Unlike many other states, Texas does not have a state income tax. This means that Texans can focus solely on federal tax planning, making tools like the GST trust even more attractive.
How Does A GST Trust Work?
Here’s how Texas families can benefit from a GST trust:
1. Establishing The Trust: A grantor (the person setting up the trust) transfers assets into the trust for the benefit of grandchildren or other descendants.
2. Appointing A Trustee: A trustee, who may be a trusted family member or a professional, manages the trust and ensures it operates according to the grantor’s instructions.
3. Avoiding The GST Tax: The GST exemption, which is $13.99 million per individual in 2025, allows Texans to transfer wealth without triggering the GST tax if their transfers stay within this limit.
4. Structured Distributions: The trust can specify how and when beneficiaries receive funds, such as for education, buying a home, or starting a business.
Key Benefits For Texans
A GST trust offers several benefits that align with the needs of Texas families:
1. Protecting Texas Assets
For Texans with valuable assets like ranches or properties in booming metropolitan areas, a GST trust ensures these assets can be passed down without being depleted by taxes.
2. Preserving Family Legacy
Texans often have strong ties to their family history and traditions. A GST trust helps maintain this legacy by ensuring wealth stays within the family for generations to come.
3. Encouraging Responsible Use
A GST trust allows Texas families to set terms for distributions, promoting education, entrepreneurship, and responsible financial management among descendants.
4. Avoiding Double Taxation
Without a GST trust, wealth may be taxed twice — once when it passes to children and again when grandchildren inherit. A GST trust avoids this, keeping more wealth in the family.
5. Protecting Beneficiaries
The trust shields assets from creditors or lawsuits, providing peace of mind for Texas families concerned about financial risks their descendants might face.
The 2025 Estate Tax Exemption: A Key Opportunity For Texans
The 2025 federal estate tax exemption of $13.99 million per person provides a unique planning opportunity for Texans. Married couples can combine their exemptions for a total of $27.98 million, creating significant tax savings. However, this exemption is set to sunset in 2026, potentially reducing the amount families can transfer tax-free.
For Texas families, acting now to create a GST trust ensures they can take full advantage of this higher exemption before it potentially decreases. This is especially important for Texans with large estates, as future tax changes could impact their ability to protect their assets.
Why Texas Families Should Act Now
Creating a GST trust in 2025 is a proactive step for Texans looking to safeguard their legacies. Whether you own a ranch in the Hill Country, a business in Dallas, or investments across the state, a GST trust provides a tailored solution to protect and grow your wealth and privacy.
With no state income tax in Texas, residents can focus on federal tax strategies to maximize their financial benefits. A GST trust not only avoids unnecessary taxation but also offers flexibility in how assets are managed and distributed.
Working With Professionals In Texas
Given the complexities of tax laws and estate planning, Texans should work with experienced professionals who understand their unique needs. An estate planning attorney familiar with Texas law can help structure a GST trust to meet both federal requirements and the specific goals of Texas families.
Professional guidance ensures that the trust is properly drafted and compliant with federal and state laws. This minimizes risks and ensures the trust operates as intended.
For Texans who value family, tradition, and financial security, a Generation-Skipping Tax Trust is a valuable tool. It allows families to pass wealth to future generations while avoiding unnecessary taxes, preserving assets like family ranches, businesses, and investments.
With the 2025 estate tax exemption set at $13.99 million, now is the time for Texas families to act. By working with experienced professionals, you can create a GST trust that reflects your family’s values and ensures your legacy continues for generations. Stuart Green Law, PLLC has been working on estate plans for families that protect their assets. We are licensed in Texas, Kentucky, Pennsylvania, and South Dakota, so contact us for help today.