Estate Planning for High Net Worth Families

The federal estate tax under Internal Revenue Code Subtitle B imposes a 40% tax on the portion of your taxable estate above the applicable exemption at death. For a married Texas couple, portability lets the surviving spouse use any unused exemption from the first death, effectively doubling the shelter. Assets held in community property in Texas get a full stepped-up basis at the first death, which interacts favorably with some trust structures. Without planning, estates above the exemption pay the 40% rate dollar for dollar.

A dynasty trust is an irrevocable trust designed to hold family wealth across multiple generations without triggering estate tax at each generation. Under the Texas Trust Code (Chapter 112), Texas allows trusts to run for extended periods, giving families a long runway for tax-free compounding. The trust also allocates the grantor's generation-skipping transfer (GST) tax exemption, so assets passing to grandchildren and beyond avoid the separate 40% GST tax layer. The dynasty trust overview for Texas families covers the structure in more detail.

A Grantor Retained Annuity Trust (GRAT) lets you transfer appreciating assets to heirs at a low or zero gift-tax cost. You transfer assets into the trust, receive an annuity back for a set term, and any growth above the IRS hurdle rate (called the Section 7520 rate) passes to heirs gift-tax free. GRATs work best in low-interest-rate environments and with rapidly appreciating assets like business equity or concentrated stock. Texas families with tech equity or growing real estate portfolios frequently use rolling short-term GRATs to move appreciation out of their taxable estate.

Yes. When you transfer a business interest or ranch into a Family Limited Partnership (FLP) or family LLC under the Texas Business Organizations Code, the minority interests you gift to heirs can qualify for valuation discounts, typically 20-40% off fair market value, due to lack of control and lack of marketability. Those discounts reduce the taxable value of the gift. The IRS scrutinizes FLPs closely, so the entity must have a genuine non-tax business purpose and be operated as a real business. Done correctly, FLP transfers are one of the most powerful tools for illiquid Texas assets.

The 5 by 5 rule is a trust distribution standard that lets a beneficiary withdraw the greater of $5,000 or 5% of the trust's value each year without causing adverse gift or estate tax consequences. It is commonly included in irrevocable trusts to give beneficiaries limited access while preserving the trust's tax-sheltered status. For high net worth families, the 5 by 5 power must be drafted carefully. In large Texas trusts, an uncapped power of withdrawal can inadvertently pull trust assets back into a beneficiary's taxable estate.

The biggest mistakes include: relying on a revocable trust as the only structure (it avoids probate but does nothing for estate tax); failing to use the GST exemption before it is consumed by direct bequests; ignoring valuation discount opportunities on business interests and real estate; letting life insurance sit inside the taxable estate instead of an ILIT; and not updating plans after major legislation like the Tax Cuts and Jobs Act changed exemption levels. Texas community property rules add another layer of complexity that out-of-state plans frequently get wrong.

Complex HNW plans with dynasty trusts, ILITs, GRATs, or FLP structures typically range from several thousand dollars to well above $10,000 depending on the number of entities and documents involved. At Robbins Estate Law, every engagement is priced as a flat fee quoted before work begins, with no hourly billing and no hidden fees. That means you know the full cost upfront. Simple plans cost less; multi-trust, multi-entity structures cost more. A free consultation scopes the work and produces a firm quote.

For a high net worth Texas family, the core documents go beyond the basics. You need: (1) a revocable living trust as the primary management and probate-avoidance vehicle; (2) one or more irrevocable trusts (dynasty trust, SLAT, ILIT, or IDGT) for tax reduction and asset protection; (3) a pour-over will to catch any assets outside the trust at death; (4) durable power of attorney and healthcare directive for incapacity; and (5) properly funded beneficiary designations and titling on every account, business interest, and real property in Texas. Missing any one of these leaves a gap that a lawsuit, divorce, or tax bill can exploit.