Estate Tax

Estate tax is a federal tax on the transfer of a deceased person's assets to their heirs. It only applies to estates exceeding the exemption threshold, which is quite high.

2024-2026 Exemption Thresholds:

Year	Individual Exemption	Married Couple (Portable)
2024	$13.61 million	$27.22 million
2025	~$13.99 million	~$27.98 million
2026	~$7 million*	~$14 million*

*2026 exemption drops dramatically unless Congress acts (TCJA sunset)

Estate Tax Rates:

• Estates over exemption: 40% federal rate
• Some states have additional estate taxes
• Applies to total estate value minus deductions

What's Included in Estate:

• Real estate
• Stocks and bonds
• Business interests
• Life insurance (if owned by deceased)
• Retirement accounts
• Personal property
• Cash and bank accounts

Common Deductions:

• Marital deduction (unlimited to spouse)
• Charitable donations
• Debts and mortgages
• Funeral expenses
• Administrative costs

Estate Tax vs. Inheritance Tax:

Estate Tax	Inheritance Tax
Paid by the estate	Paid by the heir
Federal + some states	State only (6 states)
Based on total estate	Based on what each heir receives

Planning Strategies:

1. Gifting during life - $18,000/year gift exclusion (2024)
2. Irrevocable trusts - Remove assets from estate
3. Life insurance trusts - Keep insurance out of estate
4. Charitable giving - Reduce taxable estate
5. Family limited partnerships - Valuation discounts

States with Estate Tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, DC