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The idea of the estate tax, or death tax as it’s sometimes known, is scary for many Americans. However, the real truth is that the vast majority of people will never encounter it. That’s because the federal estate tax has an extremely high exemption amount, which is $15 million. So if your estate is worth less than that 2026 exemption amount, you won’t owe any federal estate taxes. There are taxes levied by some states to contend with in certain parts of the country, though, so make sure you know what the rules are in your state.
For help with your estate plan, consider working with a financial advisor.
What Is the Estate Tax?
The estate tax is a federal law that dictates that estates worth more than the current year’s exemption pay a certain amount of tax on any value above the exemption. For 2026, the federal estate tax exemption is $15 million ($30 million for couples). That means if your estate is worth less than that at the time of your death, you won’t owe any taxes.
That $15 million exemption above means estates can subtract that amount from their total if they’re worth more than that. So if an estate has a $16 million value, it will only pay estate taxes on the $1,000,000 above the exemption. If your estate surpasses the exemption, here are the tax rates you’ll pay.
2026 Federal Estate Tax Rates 1
| Taxable Amount | Estate Tax Rate | What You Pay |
|---|---|---|
| $1 – $10,000 | 18% | – $0 base tax – 18% on the taxable amount |
| $10,001 – $20,000 | 20% | – $1,800 base tax – 20% on the taxable amount |
| $20,001 – $40,000 | 22% | – $3,800 base tax – 22% on the taxable amount |
| $40,001 – $60,000 | 24% | – $8,200 base tax – 24% on the taxable amount |
| $60,001 – $80,000 | 26% | – $13,000 base tax – 26% on the taxable amount |
| $80,001 – $100,000 | 28% | – $18,200 base tax – 28% on the taxable amount |
| $100,001 – $150,000 | 30% | – $23,800 base tax – 30% on the taxable amount |
| $150,001 – $250,000 | 32% | – $38,800 base tax – 32% on the taxable amount |
| $250,001 – $500,000 | 34% | – $70,800 base tax – 34% on the taxable amount |
| $500,001 – $750,000 | 37% | – $155,800 base tax – 37% on the taxable amount |
| $750,001 – $1 million | 39% | – $248,300 base tax – 39% on the taxable amount |
| $1 million+ | 40% | – $345,800 base tax – 40% on the taxable amount |
Most states do not have an estate tax, but a handful do. More specifically, estates of residents of Hawaii, Washington, Oregon, Minnesota, Illinois, Vermont, Maine, New York, Massachusetts, Rhode Island, Connecticut, Maryland and Washington, D.C. may be subject to estate taxes. Exemption amounts vary by state.
Who Actually Has to Pay Estate Tax?
Most estates do not owe federal estate tax because the exemption is very high. For 2026, estates can generally pass up to $15 million before federal estate tax applies. For married couples, proper planning may allow both spouses’ exemptions to be used, which can protect a larger combined estate.
| Estate value | Federal estate tax result |
|---|---|
| Below the federal exemption | Usually no federal estate tax owed |
| Above the federal exemption | Tax may apply only to the amount above the exemption |
| Married couple with portability planning | Surviving spouse may be able to use a deceased spouse’s unused exemption |
| Estate in a state with estate or inheritance tax | State-level tax may apply even if no federal estate tax is owed |
An as example, if an individual dies in 2026 with a $16 million taxable estate and has not used any exemption through lifetime taxable gifts, only the amount above the $15 million federal exemption would generally be exposed to federal estate tax. That means the taxable amount would be $1 million, not the full $16 million estate.
State taxes can change the picture. Some states have their own estate taxes, inheritance taxes or both, and their exemption amounts may be much lower than the federal exemption. That means an estate could owe state-level tax even if it is far below the federal estate tax threshold.
How Portability Can Reduce Estate Taxes for Married Couples
For 2026, the federal estate tax exemption is $15 million per person, allowing many married couples to transfer substantial wealth without triggering federal estate taxes. In many cases, the surviving spouse can also use any unused exemption from the spouse who dies first through a provision known as portability.
Portability is not automatic, however. Even if the first spouse’s estate is well below the federal estate tax exemption and no tax is due, the executor generally must file a federal estate tax return and elect portability to preserve the unused exemption. Missing this filing could reduce the amount the surviving spouse can ultimately transfer free of federal estate tax.
For example, assume one spouse dies in 2026 with an estate worth $8 million. Because the estate falls below the $15 million federal exemption, no federal estate tax would generally be owed. If portability is properly elected, the surviving spouse may be able to add the deceased spouse’s unused exemption to their own, increasing the amount they can transfer without triggering federal estate tax.
While portability can be a valuable planning tool, it does not replace a comprehensive estate plan. Families with large estates, closely held businesses, real estate holdings or property in states with their own estate or inheritance taxes may still benefit from trusts and other estate planning strategies that provide additional flexibility and asset protection.
What Is Inheritance Tax?
In addition to the estate tax, some states have inheritance taxes that beneficiaries of estates may need to pay. It is similar to the estate tax but is levied on the other side of the assets passing through to a new party. Inheritance taxes are less common than estate tax but they are required in some states.
The states that require an inheritance tax include Nebraska, Iowa, Kentucky, Pennsylvania, New Jersey and Maryland. Maryland is the only state to have both estate and inheritance taxes.
How to Avoid the Estate Tax
As you might expect, most people aren’t exactly thrilled at the proposition of paying estate taxes after their death. In turn, there are several strategies you can use to minimize what you owe or avoid estate taxes altogether. Below, we review several ways you can avoid the estate tax if you expect your estate to owe.
1. Give Gifts to Family
One way to get around the estate tax is to hand off portions of your wealth to your family members through gifts. For 2026, you can give any one person up to $19,000 tax-free (or up to $38,000 if you’re married and you’re filing joint tax returns). Throughout your lifetime, you can give out up to $15 million of your wealth as gifts before getting hit with the gift tax.
There’s no limit to the number of people you can give gifts to within a single year. So if you have an $18 million estate, you can gradually pass on your assets to your loved ones until the net value of your estate is less than (or equal to) $15 million. Just keep in mind that this threshold applies to both the gift tax and estate tax at the same time.
2. Set Up an Irrevocable Life Insurance Trust
If you don’t want to leave your family members in a difficult financial situation after you die, it’s a good idea to buy life insurance. Life insurance proceeds generally aren’t taxable. But after you pass away, they could become part of your estate, which is subject to taxation.
To avoid having your life insurance proceeds taxed, you can create an irrevocable life insurance trust. You’d essentially be setting up a trust and transferring the ownership of it to another person. The trust is irrevocable because, in the future, you won’t be able to make adjustments to it without the consent of the trust’s beneficiary.
By transferring over your life insurance policy, your death benefits wouldn’t be part of your estate. It’s best to do this sooner rather than later, however. If you die within three years of making the transfer, your life insurance proceeds would still be considered part of your taxable estate.
3. Make Charitable Donations
Another way to bypass the estate tax is to transfer part of your wealth to a charity through a trust. There are two types of charitable trusts: charitable lead trusts (CLTs) and charitable remainder trusts (CRTs).
If you have a CLT, the trust makes regular payments to a qualified charity for a set period. Once that period ends, the remaining assets pass to the non-charitable beneficiaries you have named. A CLT can also provide tax benefits depending on how the trust is structured.
A CRT works in the opposite order. The donor or other non-charitable beneficiaries can receive income from the trust for life or for a set period of up to 20 years. Once that period ends, the remaining assets pass to one or more qualified charities. A CRT may also provide a charitable tax deduction and can have capital gains tax and estate tax benefits, depending on the assets transferred and the trust structure.
4. Establish a Family Limited Partnership
If there are any family-owned businesses or assets (such as properties) that you want your children to own after you’re gone, you can set up a family limited partnership. Typically, this involves establishing a general partnership and then making heirs and family members limited partners.
As the general partner, you’ll still be able to call the shots. But your partners (whether they’re your children or another relative) will have a stake in your company or own a portion of your assets. As a result, the size of your estate will be smaller.
5. Fund a Qualified Personal Residence Trust
An additional way to reduce the number of assets that will be subject to the estate tax is to fund a qualified personal residence trust (QPRT). With a QPRT, you’re transferring the ownership of your home into a trust. During the trust’s term, you can continue living in your home without paying rent. After that term ends, your beneficiaries can take over your property.
Through a QPRT, you can transfer your primary residence or vacation home to an irrevocable trust while retaining the right to live in the property for a set period. This arrangement may reduce the value of the property for gift tax purposes.
Unfortunately, if you die before the end of your trust’s term, your home will still be part of your estate. And while you can create a trust for your house with a mortgage, it’s easier to set up a QPRT for a rental property.
How to Avoid Inheritance Taxes
If you’re inheriting an estate instead of transferring assets to someone else when you pass, then it’s important to understand what taxes you may need to pay as well. Only six states currently require an inheritance tax but if you’re in one of those states then it’s important to know how to limit what you may be required to pay. There are two major ways to avoid inheritance taxes:
- Move to a state that doesn’t require inheritance taxes
- Work with the owner of the estate before their passing to avoid potential taxes
The owner of the estate can write a will or put the assets in a trust with you as a beneficiary who may be able to help with taxes. The best thing you can do is to consult with a financial advisor as early on in the process as possible to see what can be done to avoid any potential taxes that don’t need to be necessary for your situation.
Bottom Line
For those with significant assets, estate planning can help preserve more wealth for future generations. The federal estate tax exemption means many estates will not owe federal estate tax, but larger estates may require additional planning. Trusts, charitable giving and other strategies may help manage potential taxes depending on the size of the estate and the owner’s goals. A financial advisor, estate planning attorney or tax professional can help determine which strategies may be appropriate.
“Because of the large estate tax exemption, many people won’t have to worry about their heirs having to pay an estate tax. However, if you do have a large enough estate, then you’ll want to plan accordingly because large estates hit the top tax bracket (40%) quite quickly,” said Matthew Hofacre, MSPFP, CFP®, EA.
Matthew Hofacre, MSPFP, CFP®, EA provided the quote used in this article. Please note that Matthew is not a participant in SmartAsset AMP, is not an employee of SmartAsset and has been compensated. The opinion voiced in the quote is for general information only and is not intended to provide specific advice or recommendations.
Estate Planning Tips
- A financial advisor can help you optimize your estate plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Although estate plans generally include wills, they are much, much more than that. To learn more, read through SmartAsset’s guide to estate planning versus wills.
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Article Sources
All articles are reviewed and updated by SmartAsset’s fact-checkers for accuracy. Visit our Editorial Policy for more details on our overall journalistic standards.
- “Instructions for Form 706 (09/2025) | Internal Revenue Service.” Home, Sept. 1, 2025, https://www.irs.gov/instructions/i706.