Estate and Gift Tax FAQ

Will my estate have to pay federal estate tax?

The vast majority of estates, more than 99 percent, never owe federal estate tax. It only applies if your taxable estate exceeds $15 million for deaths in 2026. Married couples can combine their exemptions, sharing a total of $30 million, and any amount left to a surviving spouse who is a U.S. citizen passes free of estate tax regardless of value.

The federal gift and estate tax is really a single unified tax. The same exemption amount applies whether you give property away during your lifetime or leave it at death.

What is the federal tax rate for taxable estates?

The maximum federal estate and gift tax rate for 2026 is 40 percent, a rate that has held steady since 2013.

Are there ways to reduce or avoid federal estate taxes?

A few common strategies:

• Tax-free annual gifts. You can give up to $19,000 per recipient per year without triggering gift tax, and payments made directly for someone’s tuition or medical bills, or to a charity, don’t count against your exemption at all. Doing this consistently over several years can meaningfully shrink a taxable estate.
• AB trusts, where a couple leaves property in trust for their children while giving the surviving spouse lifetime use of it, keeping the second spouse’s taxable estate smaller. With today’s high exemption and the portability rules that let spouses combine exemptions, this structure is unnecessary for most couples, though it can still make sense in certain situations.
• QTIP trusts, which let couples postpone estate taxes until the second spouse dies. Like AB trusts, these are less commonly needed given current exemption levels, but they remain relevant for some estates.
• Charitable trusts, which involve a substantial gift to a tax-exempt organization.
• Life insurance trusts, which remove life insurance proceeds from your taxable estate.

Can I just give everything away before I die to avoid estate tax?

Not quite, since gift tax and estate tax share the same lifetime exemption. Whatever you transfer during your life or leave at death combines toward that single $15 million exemption for 2026, and the exemption amount rises annually with inflation.

Most ordinary gifts don’t count against this exemption at all. Only gifts exceeding $19,000 per person per year are considered taxable and would begin to use up your exemption, though staying under that annual amount over time can add up to significant estate tax savings.

Certain gifts are exempt no matter the size: gifts to a U.S. citizen spouse are unlimited, gifts to a noncitizen spouse are exempt up to roughly $194,000 in 2026, gifts to tax-exempt charities are exempt, and money paid directly for someone’s medical care or tuition is exempt as well.

Do states impose their own estate tax?

Some do, even for estates well below the federal threshold.

State estate tax. A number of states levy their own estate tax, generally at a lower rate than the federal tax, and often with a much lower exemption threshold than the federal $15 million. Property passing to a surviving spouse is typically exempt at the state level too, just as it is federally.

Inheritance tax. A smaller number of states impose a separate inheritance tax, where the rate depends on the heir’s relationship to the deceased. Property passing to a spouse or close relative is usually taxed lightly or not at all, while more distant heirs may face a higher rate.

Can I avoid state estate or inheritance tax?

If your state imposes one of these taxes, there’s often little you can do short of establishing legal residency elsewhere. For people who genuinely split time between two states, establishing residency in a state without an estate or inheritance tax can result in real savings for heirs, though this requires more than simply owning a home there, actual legal residency matters for tax purposes.