For deaths in 2027, the federal estate tax is figured in five moves: add up everything the person owned at fair market value, subtract debts, expenses and gifts to a spouse or charity, add back taxable lifetime gifts, apply a rate schedule that tops out at 40%, and subtract the unified credit. That credit shelters $15,480,000 per person in 2027 (it sheltered $15,000,000 for 2026 deaths), and the estate pays the tax, not the heirs.
The tax itself comes from Internal Revenue Code § 2001. The exemption comes from the One Big Beautiful Bill Act (Public Law 119-21), which the Internal Revenue Service (IRS) now also calls the Working Families Tax Cuts. That law set a new exemption for 2026 and tied it to inflation after that. So the number is not frozen. The IRS published the 2027 inflation adjustments on November 5, 2026.
A high exemption can create a false sense of security. An estate over the line loses a large share of every extra dollar. Families who do not plan sometimes have to sell a farm or a business to raise the cash. In 2023, only about 0.2% of estates were estimated to owe any federal estate tax, but the ones that do owe a lot.
The Three Taxes That Govern Your Legacy
The U.S. government uses a three-part system to tax the transfer of wealth. Think of the parts as three connected rulebooks. All three share the same per-person exemption. Knowing how they connect is the first step to protecting your assets.
What is the Estate Tax?
The estate tax is a tax on your right to transfer property when you die. Your estate pays it before your heirs get anything. Only estates with a total value over the exemption amount pay this tax.
What is the Gift Tax?
The gift tax stops people from dodging the estate tax by giving everything away before they die. Each year you can give a set amount to as many people as you like, tax-free. This annual exclusion is $19,000 per recipient for 2026 and $20,000 per recipient for 2027. A married couple who split gifts can give $40,000 per recipient in 2027.
A gift above the annual exclusion is a taxable gift. You report it on Form 709, due April 15 of the following year. The extra amount lowers your lifetime exemption, which is the same amount that shelters your estate at death. You pay nothing out of pocket until your total taxable gifts pass the exemption for the year of the gift.
Keep a copy of every Form 709 you file. Your executor will need all of them to finish the estate tax return. A gift that was never reported can surface at death and cause trouble for the family.
Gifts to a spouse who is not a U.S. citizen have their own limit. For 2027 the annual exclusion for those gifts is $201,000.
What is the Generation-Skipping Transfer (GST) Tax?
The generation-skipping transfer (GST) tax is an extra tax on assets you leave to grandchildren or to anyone two or more generations younger than you. It closes a loophole that let wealthy families skip a generation and avoid a second round of estate tax.
The GST exemption equals the basic exclusion amount for the year, so it rose for 2027 along with the estate tax exemption. Above that, the GST tax for 2026 and 2027 transfers is a flat 40%, the same as the top estate tax rate. It is charged on top of any estate or gift tax. You assign your GST exemption to specific transfers on Form 709 during life or on Form 706 at death.
The 2026 Rule Changes: Why This Year Matters
The 2025 law, enacted on July 4, 2025, rewrote the exemption. It set a new, higher basic exclusion for deaths and gifts starting in 2026. It also told the IRS to raise that amount for inflation every year from 2027 on. That is why the figures in this article moved from the 2026 amount to the higher 2027 amount.
The Old Law and the "Tax Cliff" We Avoided
This part is history, but it explains gifts many families already made. Under the Tax Cuts and Jobs Act of 2017, the high exemption was set to expire on December 31, 2025. In 2024 the exemption was $13,610,000. In 2025 it was $13,990,000.
Had the old law expired, the exemption would have dropped by about half. Estimates made before the 2025 law put the 2026 figure at around $7 million. That was a projection, and it never took effect. The deadline still pushed many wealthy families to make large gifts before the end of 2025.
Those gifts are safe. Under the IRS anti-clawback rule (Treasury Regulation § 20.2010-1(c)), a gift made under a higher exclusion is not penalized if the exclusion later falls.
The New Law: A $15 Million "Permanent" Exemption
The exemption is $15,000,000 per person for 2026 and rises with inflation each year after. For 2027 it is $15,480,000 per person. A married couple who use portability can shelter $30,960,000 in 2027 if both spouses die that year. For 2026 the couple figure was $30,000,000.
The law calls the exemption "permanent." That only means it has no expiration date. Congress can still change it. People often ask whether a future Congress will cut it, and no advisor can answer that. The practical approach is to plan under the rules in force today and review the plan when the law changes.
Federal Estate and Gift Tax Exemptions by Year
Exemption amounts for tax years 2024 through 2027:
| Tax year | Basic exclusion per person | Annual gift exclusion per recipient |
|---|---|---|
| 2024 (history) | $13,610,000 | $18,000 |
| 2025 (history) | $13,990,000 | $19,000 |
| 2026 | $15,000,000 | $19,000 |
| 2027 | $15,480,000 | $20,000 |
The top rate is the same in every year shown. The 2024 and 2025 rows are history. The 2027 amounts come from Revenue Procedure 2026-35, and the IRS keeps earlier years on its estate and gift tax page for reference.
The 5 Steps to Calculating the Federal Estate Tax
The IRS uses a five-step process to reach the final tax bill. It starts with everything you own and ends with credits. The steps follow the lines of Part 2 of Form 706, the federal estate tax return.
Step 1: Find the "Gross Estate"
List everything the person owned or had an interest in on the day of death. This is the gross estate. Each item is valued at fair market value, which is what it would sell for on that date, not what was paid for it.
The gross estate is broad. It includes:
- Cash, stocks, and bonds.
- Real estate, like homes and land.
- Retirement accounts, like 401(k)s and individual retirement accounts (IRAs).
- Life insurance policies owned by the person who died.
- Cars, jewelry, art, and other personal items.
- Interests in a family business.
- Assets held in a revocable trust.
- Jointly owned property: generally half for spouses, and for other co-owners the share the person paid for.
- Life insurance the person transferred within 3 years of death.
- Property the person could direct through a power of appointment, and gifts where the person kept income or control.
Retirement accounts count at full value. Heirs also owe income tax when they take the money out. The tax code calls this income in respect of a decedent.
The executor may pick an alternate valuation date six months after death. This choice is allowed only if it lowers both the gross estate and the estate tax.
Step 2: Subtract Debts and Expenses to Get the "Adjusted Gross Estate"
Next, subtract certain debts and expenses from the gross estate. The result is the adjusted gross estate.
Allowable deductions include:
- Mortgages and other debts the person owed.
- Funeral expenses.
- Attorney fees, executor fees, and court costs to settle the estate.
- Income and property taxes owed but unpaid at death.
- State estate or inheritance taxes the estate paid.
- Casualty or theft losses while the estate is being settled.
Administration expenses can be deducted on Form 706 or on the estate's income tax return, Form 1041. They cannot be deducted on both.
Step 3: Subtract Marital and Charitable Gifts to Get the "Taxable Estate"
Two large deductions come off the adjusted gross estate to reach the taxable estate.
- Unlimited marital deduction. Any asset left to a surviving spouse who is a U.S. citizen is 100% deductible. Married couples can delay estate tax until the second spouse dies.
- Charitable deduction. Anything left to a qualified charity, such as a church or a 501(c)(3) non-profit, is 100% deductible. There is no cap.
Assets left to a spouse who is not a U.S. citizen qualify only if they pass through a qualified domestic trust (QDOT). Assets left in a qualified terminable interest property (QTIP) trust can also qualify when the executor elects it. The blended family section below explains that trust. Because of the second deduction, gifts to charity at death do not use up any of your exemption.
Step 4: Add Back Lifetime Gifts and Find the "Tentative Tax"
This step is where the gift tax and the estate tax connect. Take the taxable estate and add back every taxable gift the person made after 1976. The total is the tentative tax base.
Then apply the rate schedule to that base. The result is a first-pass figure called the tentative tax. For 2026 and 2027 deaths, the rates start at 18% and rise quickly to the top rate. Any gift tax the person actually paid on those gifts is subtracted later as a credit, so the same gift is not taxed twice.
| Tentative tax base (taxable estate + adjusted taxable gifts) | Tentative tax, 2026 and 2027 deaths |
|---|---|
| $0 – $10,000 | 18% of the amount |
| $10,001 – $20,000 | $1,800 + 20% of the amount over $10,000 |
| $20,001 – $40,000 | $3,800 + 22% of the amount over $20,000 |
| $40,001 – $60,000 | $8,200 + 24% of the amount over $40,000 |
| $60,001 – $80,000 | $13,000 + 26% of the amount over $60,000 |
| $80,001 – $100,000 | $18,200 + 28% of the amount over $80,000 |
| $100,001 – $150,000 | $23,800 + 30% of the amount over $100,000 |
| $150,001 – $250,000 | $38,800 + 32% of the amount over $150,000 |
| $250,001 – $500,000 | $70,800 + 34% of the amount over $250,000 |
| $500,001 – $750,000 | $155,800 + 37% of the amount over $500,000 |
| $750,001 – $1,000,000 | $248,300 + 39% of the amount over $750,000 |
| Over $1,000,000 | $345,800 + 40% of the amount over $1,000,000 |
This schedule applies to the whole tentative tax base. The exemption comes off afterward, through the unified credit in Step 5.
Step 5: Apply the Unified Credit to Find the Final Tax Bill
The last step subtracts credits from the tentative tax. The biggest one is the unified credit. It equals the tentative tax on the basic exclusion amount for the year of death.
Run the 2027 exclusion through the rate table above. For 2027 deaths, the tax is $345,800 on the first $1,000,000 plus $5,792,000 on the $14,480,000 above it. That makes the credit $6,137,800 for 2027 deaths. For 2026 deaths, the same math gave a credit of $5,945,800.
If the tentative tax is less than the credit, the estate tax is zero. If it is more, the difference is the bill the estate must pay. In practice, every dollar above the exclusion is taxed at the top rate.
A surviving spouse may have more shelter. Any unused exclusion from a spouse who died first is added to the survivor's exclusion before the credit is figured. Tax forms call this the deceased spousal unused exclusion.
Putting All 5 Steps Together: A Full 2027 Calculation
Take a single person who dies in 2027.
- Gross estate: $20,000,000.
- Subtract $500,000 of debts and $200,000 of funeral and administration costs. Adjusted gross estate: $19,300,000.
- Subtract a $1,000,000 bequest to charity. Taxable estate: $18,300,000.
- Add back $2,000,000 of taxable gifts made after 1976. Tentative tax base: $20,300,000. Tentative tax from the rate table: $345,800 plus $7,720,000, or $8,065,800.
- Subtract the 2027 unified credit of $6,137,800.
The result for this 2027 death is an estate tax of $1,928,000. A quick check gives the same answer. The base is $4,820,000 above the 2027 exclusion, and the top rate on that amount is also $1,928,000.
Real-World Scenarios: Putting the Calculation to Work
Seeing the numbers in action makes the rules easier to follow. Here are three common situations families face. Each one uses the official 2026 or 2027 exclusion, labeled by year.
Scenario 1: The Married Couple and the Power of Portability
David and Sarah are married. David dies in 2026 with $20 million in his name and leaves it all to Sarah. He made no taxable gifts during life. His executor files a timely estate tax return to elect portability, which hands his unused exclusion to Sarah.
Sarah dies in 2027 with a $41 million taxable estate. Her own 2027 exclusion is $15,480,000. David's unused 2026 exclusion adds $15,000,000. Her total shelter is $30,480,000, so $10,520,000 is taxed at 40%. Her estate owes a tax of about $4,208,000.
Without the election, her estate would owe about $10,208,000 in 2027. One form saves the family $6,000,000. David's unused amount is fixed at the first death. It does not grow with inflation.
Portability with a 2026 death and a 2027 death:
| Event | Consequence (2026 and 2027 figures) |
|---|---|
| David's $20M passes to Sarah in 2026. | The unlimited marital deduction makes his taxable estate $0. No tax is due. |
| The executor files Form 706 to elect portability. | David's full 2026 exclusion of $15,000,000 moves to Sarah. |
| Sarah dies in 2027 with a $41M taxable estate. | Her total shelter is $30,480,000. The tax is about $4,208,000. |
Scenario 2: The Family Business Owner with a Liquidity Problem
Ms. Chen is single. She dies in 2027 with a $24 million taxable estate. The main asset is her $20 million manufacturing company.
Her estate subtracts the 2027 exclusion of $15,480,000. That leaves $8,520,000 taxed at 40%, or about $3,408,000 in tax. Had she died in 2026, the bill would have been about $3,600,000.
The problem is cash. Most of her wealth is tied up in a business that cannot be sold quickly. Her estate may not have $3,408,000 in the bank. Her children could be forced to sell the company she built just to pay the IRS.
The tax code offers three kinds of relief:
- Installment payments. When a closely held business is more than 35% of the adjusted gross estate, the tax tied to it can be spread over up to 14 years. The first 5 years are interest only.
- Special-use valuation. Qualifying family farm or business property can be valued at its current use instead of its highest sale price.
- Life insurance. A policy held in an irrevocable life insurance trust (ILIT) pays cash outside the estate that heirs can use for the tax.
| Asset Situation (2027 death) | Tax Outcome |
|---|---|
| Ms. Chen's taxable estate is $24 million. | Her estate uses the 2027 exclusion of $15,480,000. |
| The remaining $8,520,000 is subject to tax. | The estate owes about $3,408,000 in federal estate tax ($8,520,000 x 40%). |
When Is Form 706 Due and How Is the Tax Paid?
An estate must file Form 706 when the gross estate plus adjusted taxable gifts is more than the basic exclusion. For 2027 deaths, that line is the 2027 exclusion. A small estate does not file this return at all. It may still need Form 1041 if the estate earns income before the assets are handed out.
The return and the payment are both due nine months after death. Form 4768 gives an automatic six-month extension to file. It does not extend the time to pay. More time to pay requires a showing of reasonable cause.
An estate like Ms. Chen's can ask to pay the business share of the tax in installments, as described above. The executor should settle the tax before handing out assets. An executor who pays heirs first can be held personally liable for the unpaid tax.
Couples have one more filing to watch. A portability return is needed to pass the unused exclusion to a surviving spouse, even when no tax is owed.
Scenario 3: The Farmer Who Gifted Before the Law Changed
Mr. Rodriguez, a widower, owned a farm worth $22 million. Back in 2024, he gave $5 million of the farm to his children to use the high exemption before the old law expired. He paid no gift tax then, because the gift was under the 2024 exemption of $13,610,000. He dies in 2027 with a remaining estate of $16.5 million.
The gift is added back, so his tentative tax base is $21.5 million. The amount over the 2027 exclusion of $15,480,000 is $6,020,000. At 40%, his estate owes roughly $2,408,000 in tax.
The gift did not avoid tax on the $5 million. It did move the farm's later growth out of his estate, a key goal for farmers with rising land values. The anti-clawback rule protects gifts like his.
A 2024 gift counted in a 2027 death:
| Planning Decision | Tax Calculation Consequence (2027 death) |
|---|---|
| Mr. Rodriguez made a $5 million taxable gift in 2024. | For the tax calculation, this $5 million gift is added back to his $16.5 million taxable estate. |
| The tentative tax base becomes $21.5 million. | The 2027 exclusion of $15,480,000 is applied through the unified credit. |
| $6,020,000 is over the exclusion. | The final tax is roughly $2,408,000 for a 2027 death. |
Key Strategies to Protect Your Wealth
For families with estates over the 2027 exemption, planning is not optional. It is a critical step to protect your legacy. Here are some of the most powerful tools available.
The Gifting vs. Inheriting Trade-Off
Making gifts during your life shrinks your final estate. There is a major trade-off, though, and it involves capital gains taxes. Some families even gift property up to older parents, hoping to inherit it back with a higher basis. That move uses the giver's exemption, and it can backfire if the parents' own estate grows past the limit.
Lifetime gifting under the 2027 rules:
| Pros of Lifetime Gifting (2027 rules) | Cons of Lifetime Gifting (2027 rules) |
|---|---|
| Removes future growth: appreciation on the gifted asset happens outside your estate and escapes the estate tax. | Loss of step-up in basis: the recipient keeps your original low basis and may owe a large capital gains tax on a sale. |
| Uses high exemption: a gift uses the 2027 exemption, which the anti-clawback rule protects if the law later cuts it. | Loss of control: once you give an asset away, it is gone. You cannot take it back. |
| Provides immediate help: your loved ones can use the assets now instead of waiting. | Irrevocable decision: large gifts that use your lifetime exemption are permanent. |
| Reduces estate size: a smaller gross estate is less likely to be taxed. | Recipient may lose the asset: it is now exposed to the recipient's creditors or a divorce settlement. |
| Simple to do: gifts within the annual exclusion need no Form 709, unless spouses elect gift-splitting. | May not be necessary: if your estate is well below the exemption, gifting saves no tax and gives up the step-up. |
Heirs who inherit an asset get a step-up. Their cost basis becomes the value at your death, which erases the built-in gain if they sell. A gifted asset does not get this benefit.
Powerful Protection with Irrevocable Trusts
An irrevocable trust is a legal tool where you transfer assets to a trustee, who manages them for your beneficiaries. Once created, you cannot change it. If the trust is drafted properly and you keep no interest in the assets, they are no longer part of your gross estate. This is a powerful way to reduce taxes and protect assets.
| Trust Type | How It Works | Best For | Key Risk |
|---|---|---|---|
| Spousal Lifetime Access Trust (SLAT) | You gift assets to a trust for your spouse. The gift uses your exemption. | Couples who want indirect access to gifted assets. | Divorce or the spouse's death ends your indirect access. |
| Grantor Retained Annuity Trust (GRAT) | The trust pays you an annuity. Growth above the IRS Section 7520 rate passes to heirs. | Fast-growing assets, using little or no exemption. | If you die during the term, the assets return to your estate. |
| Irrevocable Life Insurance Trust (ILIT) | The trust owns a life insurance policy, so the proceeds stay outside your estate. | Estates that need cash to pay tax. | A policy you transfer is pulled back if you die within 3 years. |
| Qualified Personal Residence Trust (QPRT) | Your home goes into the trust at a discounted gift value. | Owners of a valuable home they plan to keep. | You must outlive the trust term. |
Common Mistakes That Can Destroy Your Plan
Even the best intentions can be ruined by simple mistakes. Famous people like Prince, Michael Jackson, and Aretha Franklin made critical errors that cost their families years of time and millions of dollars in legal fees and taxes.
Top 5 Estate Planning Blunders to Avoid
Mistake 1 is not funding your trust. Michael Jackson signed a trust, but he never legally transferred his assets into it. This made the trust useless, and his $600 million estate was stuck in court for years. A trust is an empty box until you put things in it.
Mistake 2 is failing to update your plan. Heath Ledger created a will before his daughter was born but never updated it. His entire estate went to his parents and sisters, and his daughter got nothing. Review your plan after major life events like a birth, death, marriage, or divorce.
Mistake 3 is ignoring beneficiary designations. The beneficiary forms on your life insurance and retirement accounts override your will. If your will says everything goes to your kids, but your ex-spouse is still listed on your 401(k), your ex-spouse gets the money.
Mistake 4 is using a DIY or handwritten will. Aretha Franklin had two different handwritten wills that were found in her home. The conflicting instructions caused her four sons to fight in court for five years over her legacy. Online forms and DIY plans often create more problems than they solve because they are not customized and may not follow state law.
Mistake 5 is assuming you don't need a plan. Prince died without any will or trust at all. His $200 million estate led to 45 people claiming to be his heir, and the legal battles drained millions from his legacy. If you do not have a plan, the state has one for you, and you will not like it.
Do's and Don'ts for a Successful Estate Plan
| Do's | Don'ts |
|---|---|
| Do assemble a professional team (attorney, CPA, financial advisor). | Don't try to do it yourself with online forms to save money. |
| Do review your plan every 3-5 years and after major life events. | Don't "set it and forget it." An outdated plan can be worse than no plan at all. |
| Do fund your trust by retitling assets in the trust's name. | Don't assume creating the trust document is the final step. |
| Do coordinate your beneficiary designations with your will and trust. | Don't forget that retirement accounts and life insurance pass outside your will. |
| Do communicate your wishes and the location of documents to your family. | Don't hide your plan, causing confusion and stress for your loved ones later. |
| Do file Form 706 for portability even if no tax is due. | Don't assume a spouse's unused exemption transfers automatically. |
Special Rules for Different Family Situations
The standard rules do not always work for every family. Blended families, unmarried couples, and non-citizens face unique challenges that require special planning.
How to Protect Children in a Blended Family
In a blended family, there is a high risk of accidentally disinheriting children from a prior marriage. If you leave everything directly to your new spouse, they are legally free to write a new will and leave all the assets to their own children, cutting yours out completely.
The best tool to prevent this is a QTIP trust. This trust pays income to your surviving spouse for life. But the spouse cannot control who gets the assets afterward. The trust terms you set dictate that the remaining assets pass to your children, so your legacy is protected. Your executor makes the QTIP election on Form 706 to claim the marital deduction.
Why Unmarried Couples Face a Tax Disadvantage
Unmarried couples cannot use the two most powerful estate planning tools: the unlimited marital deduction and portability. When the first partner dies, the estate could face a large tax bill right away if it is over the 2027 exemption.
To solve this, unmarried couples often use life insurance. Each partner buys a policy on the other, owned by an ILIT. When the first partner dies, the tax-free death benefit gives the survivor cash to pay any estate tax owed.
Partners can also give to each other during life. Each can give the other up to the 2027 annual exclusion every year without using any exemption.
The Harsh Rules for Non-U.S. Citizens
The rules are completely different for non-citizens who are not legally domiciled in the U.S. They are taxed only on their U.S.-based assets, like real estate or stock in U.S. companies.
For 2026 and 2027 deaths, their exemption is only $60,000. It comes from a fixed $13,000 credit written into the tax code, and it does not rise with inflation. U.S. assets over that amount are taxed at the same rates that apply to citizens. This is a major trap for foreign nationals who own property in places like Florida or New York. An estate tax treaty with the person's home country can change the result.
A second trap hits U.S. residents married to a non-citizen. The unlimited marital deduction does not apply unless the assets pass through a QDOT. Tax-free lifetime gifts to a non-citizen spouse are capped at $201,000 a year in 2027, up from $194,000 in 2026.
What to Do Next
- Add up your gross estate at today's fair market value, including life insurance and retirement accounts.
- Gather every Form 709 you have filed and total your taxable gifts made after 1976.
- Compare the total with the 2027 exclusion in the table above, or with your combined figure if you are married.
- If your spouse has died, check whether Form 706 was filed to claim portability.
- Review your beneficiary forms and trust funding with an estate attorney.
Frequently Asked Questions (FAQs)
Is there a difference between an estate tax and an inheritance tax?
Yes. An estate tax is paid by the estate of the person who died. An inheritance tax is paid by the person who receives the inheritance. The federal government only has an estate tax. Five states levy an inheritance tax: Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. Iowa's ended for deaths on or after January 1, 2025.
Can my estate owe both federal and state estate tax?
Yes. If you live in one of the 12 states (plus D.C.) with an estate tax, your estate could owe both. State exemptions are much lower than the federal one, so many families pay state tax but no federal tax. State estate tax the estate pays is deductible on Form 706.
How does my spouse get my unused estate tax exemption?
Through an election called portability. Your executor makes it on a timely Form 706, due nine months after death, or fifteen months with a Form 4768 extension. It is not automatic. An estate that is not otherwise required to file can elect late, up to five years after death, under Revenue Procedure 2022-32. The amount is not indexed.
What happens if I give someone more than the annual limit ($20,000 in 2027)?
You file a gift tax return, Form 709, by April 15 of the next year. The amount over the limit reduces your lifetime exemption for the year of the gift. Tax is due only once your total taxable gifts pass that exemption. The 2026 annual limit was $19,000.
What is the "step-up in basis" I keep hearing about?
It is a large tax benefit. When you inherit an asset, its cost basis steps up to its value on the date of death, so an heir can sell and owe little or no capital gains tax. IRAs, 401(k)s and lifetime gifts get no step-up. Heirs must use the basis the estate reports on Form 8971, where required.
Do I need an estate plan if I'm not wealthy?
Yes. Everyone over 18 needs a plan. An estate plan names guardians for your children. It also gives someone authority to make medical and financial decisions for you if you become incapacitated. Powers of attorney and healthcare directives are part of the plan. A small estate will not owe federal estate tax, but this paperwork still matters.
Is a will enough to avoid probate court?
No. A will must go through probate. Probate is the court process that validates a will, and it can be slow, expensive, and public. A funded revocable trust is the most common tool used to avoid probate. Beneficiary designations and joint ownership with survivorship rights also pass assets outside probate.
Related reading
- Did Big Beautiful Bill Eliminate Estate Tax? (w/ Examples) + FAQs
- What is the Difference Between Gross Estate and Net Estate? (w/Examples) + FAQs
- What Are the Differences Between Estate Tax and Inheritance Tax? (w/Examples) + FAQs
- How Can an Estate Minimize Its Tax Burden Legally? (w/Examples) + FAQs
- How Much Can My Children Inherit Without Paying Taxes? (w/Examples) + FAQs
- How Much Can You Inherit Without Paying Taxes in New York? (w/Examples) + FAQs
What is the federal estate tax exemption for 2027?
It is $15,480,000 per person for deaths in 2027, up from $15,000,000 in 2026. A married couple using portability can shelter $30,960,000 in 2027. The 2027 annual gift exclusion is $20,000 per recipient. The IRS set these amounts in Revenue Procedure 2026-35, released on November 5, 2026.
Will the estate tax exemption go back down?
No drop is scheduled. The 2025 law removed the sunset, and the exemption now rises with inflation each year. Only a new act of Congress could lower it, and nobody can predict that. If it ever falls, the anti-clawback regulations protect gifts already made under the higher amount.
Do heirs pay income tax on what they inherit?
Generally no. Inherited cash and property are not federal taxable income, and the basis steps up. The exceptions are withdrawals from a traditional IRA or 401(k), usually emptied within 10 years, and income the assets earn after death. An account left to the estate with no named beneficiary can face a shorter five-year window.