Question 1

What is the federal estate tax and who pays it?

Accepted Answer

The federal estate tax is a tax on the transfer of assets from a deceased person to their heirs. It is imposed on the taxable estate — the gross estate minus allowable deductions (debts, mortgages, funeral expenses, marital deduction, charitable deduction). Under IRC §2001, the estate tax applies at a progressive rate schedule, with a top rate of 40%. However, the unified credit under IRC §2010 shields the first [applicable exclusion amount] of every estate from tax entirely. Under 2026 law, only estates larger than $15M per person owe any federal estate tax ($13.99M in 2025). According to IRS Statistics of Income data, fewer than 0.5% of all decedents owe federal estate tax in any given year — but for those who do, the liability can be substantial. Consult a licensed estate planning attorney before any planning decisions.

Question 2

What is the TCJA sunset and why does it matter for 2026?

Accepted Answer

The Tax Cuts and Jobs Act of 2017 (TCJA) roughly doubled the federal estate and gift tax exemption, and under IRC §2010(c)(3)(C) that increase was scheduled to expire on December 31, 2025 — reverting the per-person exemption to roughly $7M and pulling many estates into federal estate tax for the first time. That was the #1 estate planning question of 2024-2025. **It did not happen.** Public Law 119-21, signed July 4, 2025, amended IRC §2010(c)(3) to set the basic exclusion at $15,000,000 for 2026, indexed for inflation thereafter (IRS Rev. Proc. 2025-32). So the exemption ROSE from $13.99M in 2025 to $15M in 2026 rather than falling. The sunset scenario remains in this calculator only so you can review gifts and trusts that were planned against it. Source: Pub. L. 119-21; IRC §2010(c)(3); IRS Rev. Proc. 2025-32.

Question 3

Did legislation prevent the TCJA sunset?

Accepted Answer

Yes. Public Law 119-21 was signed on July 4, 2025 and amended IRC §2010(c)(3) to set the 2026 basic exclusion amount at $15,000,000 per person, indexed for inflation thereafter — confirmed by IRS Rev. Proc. 2025-32 and the IRS estate-tax filing-threshold table. An earlier version of this page described that bill as still 'advancing in Congress' and told readers to plan as if the sunset would occur; that guidance was correct when written and is now obsolete. If you made large gifts in 2024-2025 in anticipation of the sunset, they remain protected by the anti-clawback regulations (TD 9884, 2019; 26 CFR §20.2010-1(c)) — but the premise those gifts were made under has changed, so revisit the plan with your attorney. Consult a licensed estate planning attorney before acting.

Question 4

What is the marital deduction and how does it work?

Accepted Answer

The unlimited marital deduction (IRC §2056) allows an unlimited amount of assets to pass to a surviving U.S.-citizen spouse without federal estate tax. This does not eliminate the estate tax — it defers it to the second spouse's death. When the surviving spouse later dies, their estate will owe tax on the combined assets (plus appreciation) above the surviving spouse's applicable exclusion. Portability (IRC §2010(c)(5)) allows the surviving spouse to 'inherit' the deceased spouse's unused exclusion amount (DSUE) by timely filing a federal estate tax return for the first spouse. This calculator models portability by doubling the per-person exclusion for married filers — a simplified but common planning assumption. For precise portability calculations, consult a CPA or estate planning attorney. Consult a licensed estate planning attorney before any planning decisions.

Question 5

What is the anti-clawback rule, and should I make gifts now?

Accepted Answer

The anti-clawback regulations (TD 9884, 2019; 26 CFR §20.2010-1(c)) were issued by the IRS in response to the TCJA sunset uncertainty. They confirm that taxable gifts made while the higher TCJA exemption was in effect will not be 'clawed back' — that is, the IRS will not retroactively impose estate tax on those gifts just because the decedent died after the exemption reverted to a lower level. In practical terms: if you make a $13.99M gift to an irrevocable trust in 2025 under the elevated exemption, and you die in 2027 when the exemption is ~$7M, the gift will not be pulled back into your estate. The estate will be calculated using the higher of the gift exclusion used (at the time of the gift) or the current exclusion (at the time of death). That protection was the basis for the widespread 'use it or lose it' advice to gift before December 31, 2025. Because Pub. L. 119-21 raised the 2026 exemption to $15M instead of letting it fall, that deadline has passed without the cliff it was aimed at — gifts made under it are still protected, but the urgency argument no longer applies. Whether this strategy is appropriate depends on your specific estate, liquidity, tax situation, and personal objectives. Always consult a licensed estate planning attorney. Source: 26 CFR §20.2010-1(c), IRS TD 9884.

Question 6

What are adjusted taxable gifts and why do they matter?

Accepted Answer

Under IRC §2001(b), the estate tax is computed using a mechanic that adds 'adjusted taxable gifts' (taxable gifts made after December 31, 1976) back to the taxable estate. The unified credit then offsets the tax attributable to the exclusion amount. This ensures that gifts consumed during life and estate transfers at death are taxed under a unified rate schedule — you cannot escape the progressive brackets by making gifts instead of bequests. If you have made substantial taxable gifts in prior years (gifts above the annual exclusion that consumed lifetime exemption), those should be entered in the 'Prior taxable gifts' field. Failing to include prior gifts will cause this calculator to understate your tentative estate tax. Gift tax previously paid (under Form 709) is subtracted from the tentative tax — for simplicity, this calculator assumes gift tax was paid at the same rate schedule. Consult a CPA or estate planning attorney for precision calculations involving prior gifts. Source: IRC §2001(b), Form 709 instructions.

Question 7

Does this calculator include state estate taxes?

Accepted Answer

No. Twelve states and the District of Columbia impose their own estate tax separate from the federal estate tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. Several of these states have exemptions well below the federal exemption — Massachusetts and Oregon, for example, have exemptions of $1M and $1M respectively (as of recent law). This means residents of those states with estates between $1M and $13.99M owe state estate tax but no federal estate tax under current law. This calculator computes only the federal estate tax. A comprehensive estate plan must account for state estate taxes, income taxes on income-in-respect-of-a-decedent (IRD) assets like traditional IRAs, state inheritance taxes in a handful of states, and administrative costs. The figures shown here will understate the total estate transfer tax burden for residents of state-tax states. Consult a licensed estate planning attorney in your state.

Question 8

What planning strategies can reduce federal estate tax?

Accepted Answer

Estate planning attorneys commonly recommend several strategies to reduce federal estate tax exposure before the sunset: (1) Large gifts to irrevocable trusts (SLAT — Spousal Lifetime Access Trust, IDGT — Intentionally Defective Grantor Trust, QPRT — Qualified Personal Residence Trust), leveraging the anti-clawback rule. (Note: the pre-2026 deadline urgency for these is gone — Pub. L. 119-21 raised the 2026 exemption to $15M rather than letting it sunset.) (2) Accelerating charitable giving via direct gifts, Charitable Remainder Trusts (CRTs), or Charitable Lead Trusts (CLTs), which reduce the taxable estate while supporting causes. (3) Irrevocable Life Insurance Trusts (ILITs) that keep life insurance proceeds outside the estate. (4) Family Limited Partnerships (FLPs) or Family Limited Liability Companies (FLLCs) that apply valuation discounts for lack of marketability and lack of control. (5) Annual gifting ($19,000 per recipient per donor in 2025, per IRS Rev. Proc. 2024-40) to systematically reduce the estate. (6) Direct payments for tuition and medical expenses (§2503(e)) made directly to the institution — these are exempt from gift tax entirely and do not consume annual exclusion. The right strategy depends entirely on your specific estate, family situation, liquidity, tax basis of assets, and objectives. This calculator helps you quantify the problem; a licensed estate planning attorney and CPA help you solve it.

Federal Estate Tax Calculator (2026 Law — $15M Exemption)

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