Texas Estate Planning — What Retirees Need to Know in 2026
Texas is one of the more retiree-friendly states when it comes to death taxes — no state estate tax and no inheritance tax. Probate costs 3–6% of your gross estate and takes 6–12 months on average — costs that can be avoided with the right documents in place. Texas recognizes TOD deeds and Lady Bird Deeds, giving residents cost-effective ways to transfer real property outside of probate. Texas uses probate-only Medicaid estate recovery, meaning assets transferred via TOD deed or trust generally avoid recovery claims.
Key Texas Estate Planning Facts for 2026
| Topic | Texas Rule | Risk Level |
|---|---|---|
| State Estate Tax | None | Low |
| State Inheritance Tax | None | Low |
| Probate Cost Estimate | 3–6% · 6–12 months | Moderate |
| Medicaid Look-Back Period | 60 months (5 years) for asset transfers | High |
| Homestead Exemption | Unlimited | Protective |
| Lady Bird Deeds | Yes | Protective |
| TOD Deeds | Yes (TOD Deed) | Protective |
| Asset Protection Trust | No | Gap |
| Power of Attorney | notarization required | Required |
Texas Probate: What It Costs and How to Avoid It
Texas uses its own probate code, which can make the process more structured and court-supervised than UPC states. Even so, probate still costs 3–6% of gross estate value and takes 6–12 months on average. Estates under $75,000 may qualify for a simplified affidavit process.
- Revocable Living Trust Assets properly funded into a trust pass outside probate and remain private. Typical cost range: $1800–$4000.
- TOD Deed Texas limits Medicaid estate recovery to the probate estate (1 TAC Ch. 373). TOD deeds bypass probate and are explicitly excluded from MERP under Estates Code § 114.106(b). Lady Bird deeds also protect the home by transferring title outside probate at death.
- Joint Ownership Planning Joint tenancy structures can avoid probate but may create tax or creditor exposure. Review before implementing.
- Small Estate Affidavit Available for estates under $75,000. Waiting period: 30 days.
*Estimates derived from Texas probate and Medicaid data. Educational use only.
Medicaid Asset Protection: Texas's 60-Month Rule Explained
Texas follows federal Medicaid rules with a strict 60-month look-back period. Any asset transfer for less than fair market value within that window can trigger a penalty period. Texas is an income cap state — if your gross income exceeds $2,982/month, you must use a Qualified Income Trust (Miller Trust) to qualify.
- Lady Bird Deed Lady Bird Deed (enhanced life estate deed) available. Texas uses probate-only Medicaid estate recovery, so Lady Bird deeds effectively protect the home from MERP by transferring title outside probate at death.
- Medicaid Trust Planning Assets placed in a properly structured irrevocable trust may be protected after the 60-month look-back expires.
- Spousal Asset Protection Community spouse resource allowance for 2026: $162,660.
Texas Estate Planning Checklist — What to Do Next
| Priority | Action | Cost Range | Impact |
|---|---|---|---|
| High | Update all beneficiary designations | $0 | Avoids unintended probate transfer |
| High | Execute Durable Power of Attorney | $300–$480 | Protects during incapacity |
| Medium | Create Revocable Living Trust | $1800–$4000 | Full probate avoidance |
| Medium | Elder Law Consultation | $250–$400 | Reduce Medicaid exposure |