Federal estate tax at the $15M exemption — who actually owes, and what heirs get
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The federal estate tax touches almost nobody — the 2026 exemption is $15 million per person, $30 million per couple (made permanent and indexed) — but the planning topics around it touch everyone: the step-up in basis that erases heirs' capital gains, spousal portability that must be actively claimed, and the state estate taxes that start at a tiny fraction of the federal line. This estimator computes the federal bill honestly and points at whichever issue actually applies to your family.
A deceased spouse's unused exemption transfers to the survivor — but only if Form 706 is filed at the first death, even when no tax is due. A surviving spouse with a ported exemption shields $30M. Estates that skip the filing (common, since no tax was owed) forfeit it permanently — the single most expensive estate-paperwork omission that exists. Executors: file it.
Inherited assets take a basis equal to date-of-death value — decades of capital gains vanish untaxed. The $80k of stock Grandma bought for $5k passes to you with an $80k basis; sell immediately and owe nothing. Planning implications everyone should know: don't sell appreciated assets in late life just to "simplify" (dying with them is the tax plan), and conversely, gifts made during life carry the giver's old basis — for appreciated assets, inheriting beats receiving. The Capital Gains tool quantifies what the step-up saves.
Twelve states plus DC levy their own estate taxes with exemptions as low as $1 million (Oregon; Massachusetts $2M, Washington $2.19M at rates to 35%) — a paid-off house plus retirement accounts crosses these lines routinely. Six other states tax inheritances (the heir pays, by relationship). The state tool maps them; for residents of those states, planning starts around $1–3M, not $15M.
Federally, almost certainly not — 99.9%+ of estates fall under $15M. Heirs also don't pay income tax on inheritances (inherited IRAs' withdrawals excepted). Check your state, though: a dozen states tax estates from $1–7M.
If you own the policy, the death benefit counts toward the $15M — a $2M policy is $2M of estate. The fix for large estates is an irrevocable life insurance trust (ILIT) owning the policy; the benefit then passes outside the estate.
Estate tax: the estate pays before distribution (federal + 12 states). Inheritance tax: the HEIR pays, at rates depending on relationship (6 states; spouses exempt everywhere, children usually). Some overlap is possible (Maryland has both).
Structures that freeze or shift growth: annual-exclusion gifting programs, grantor trusts (GRATs), family partnerships with valuation discounts, ILITs, and charitable vehicles. All legal, all requiring specialists — the 40% is effectively a tax on the unadvised.
Usually a mistake: gifting during life forfeits the step-up (they take your old basis), exposes the home to their creditors/divorces, and may trigger gift-tax filings. Transfer-on-death deeds and living trusts achieve probate avoidance without those costs.
The estate tax return — required within 9 months when estates exceed the exemption, AND electively at any size to claim portability for a surviving spouse. The elective filing is the one families wrongly skip.
Yes — every figure computes locally in your browser.
For the 99.9%: protect the step-up, file for portability, check your state. For estates near the line: the calculator shows the stakes, and a good estate attorney converts 40% problems into paperwork. Either way, the worst plan is the default one.