The federal estate tax is often called the 'death tax.' It is a 40% tax levied on the transfer of wealth from a deceased person to their heirs. However, thanks to the historically high lifetime exemption, less than 0.1% of estates actually pay it today.
The Current Exemption
As of 2024, the federal estate tax exemption is $13.61 million per individual. Because of 'portability,' a married couple can combine their exemptions, shielding a staggering $27.22 million from federal estate taxes.
Important
The 2026 Sunset
The current high exemption levels were established by the 2017 Tax Cuts and Jobs Act and are scheduled to 'sunset' (expire) at the end of 2025. Unless Congress acts, the exemption will revert to roughly $7 million per individual in 2026.
The 'Use It or Lose It' Dilemma
Wealthy families are currently facing a 'use it or lose it' scenario. If you have a $20 million estate and the exemption drops to $7 million in 2026, your heirs will owe 40% on the $13 million difference. To prevent this, many are aggressively gifting assets into irrevocable trusts now to lock in the current $13.61 million exemption before it disappears.
$13.61
Key Figure
To prevent this, many are aggressively gifting assets into irrevocable trusts now to lock in the current $13.61 million