Federal Estate Tax — Who Needs to Worry?
The federal estate tax applies only to estates exceeding $13.61 million in 2024 (indexed for inflation). The vast majority of Americans owe no federal estate tax. Married couples can effectively double the exemption to $27.22 million through the portability election. If the estate exceeds the exemption, the taxable portion is taxed progressively up to a top rate of 40%.
The unlimited marital deduction allows all assets to pass to a surviving US citizen spouse tax-free, deferring any tax to the second spouse's death. Charitable bequests are also fully deductible. The current elevated exemption is scheduled to sunset after December 31, 2025 — reverting to roughly $7 million unless Congress acts — making estate planning more urgent for larger estates.
Note that 12 states and DC impose separate state estate taxes with much lower exemptions (as low as $1 million in Oregon and Massachusetts). Six states have inheritance taxes. Consult an estate planning attorney for advice on your specific situation, especially given the potential 2026 exemption reduction.
Frequently Asked Questions
Yes. Irrevocable trusts (like ILITs or SLATs) remove assets from the taxable estate if structured correctly. Gifting strategies and charitable remainder trusts also reduce the estate tax base while transferring wealth efficiently.
Form 706 is due 9 months after the decedent's death, with a 6-month extension available. Proper filing is required to elect portability for the surviving spouse's benefit.