Let’s talk estate taxes.
Most people aren’t losing sleep over whether Congress will lock in a $15 million estate tax exemption… but maybe they should be paying more attention—especially if you’re planning ahead or living in a state that imposes its own estate tax.
Here's your reality check on what's happening with federal estate tax, what really matters, and the planning tools every savvy family should consider.
🚨 The Federal Exemption Is a Moving Target
Currently, the federal estate tax exemption is around $14 million per person.
That means up to $28 million per couple can be passed on tax-free.
But that number isn’t set in stone.
If Congress does nothing, it drops to about $7 million per person on January 1, 2026.
🧠 Fun fact: 25 years ago, the exemption was under $1 million. We’ve come a long way—and we may go backward again.
🏛️ A Bill to Lock It In (Maybe)
There’s already a bill that passed the House aiming to make the $15 million exemption permanent. But it’s uncertain if it will become law—and future administrations could always reverse it.
Bottom line: If your estate is between $7M and $15M+, you’re in a potential “tax risk zone” by 2026.
🌐 State Estate Taxes: A Bigger Threat for Many
While the federal exemption is generous (for now), 12 states and D.C. have their own estate or inheritance taxes.
In some states, the exemption is as low as $1 million. That means even middle-class families can face unexpected estate taxes if they own real estate or have significant savings.
Typical state-level estate tax rates range from 10% to 16%—not as high as the federal 40%, but still substantial.
👥 How Married Couples Can Protect Themselves
Enter portability—a key planning strategy.
Here’s how it works:
Each spouse has their own exemption.
Through portability, the surviving spouse can “inherit” the unused exemption of the deceased spouse.
So today, a married couple can pass up to $28M tax-free—if the right steps are taken.
✅ Tip: Portability isn’t automatic. Your estate plan must be designed to use it properly.
📈 What About Highly Appreciated Assets?
Don’t forget the step-up in basis—one of the most powerful tax advantages still in effect.
When you inherit assets (stocks, homes, etc.), their basis is “stepped up” to current market value.
That means you can sell them without paying capital gains taxes on years (or decades) of appreciation.
🛑 However, if those assets are gifted to you during life, you don’t get the step-up—you get the original basis, which can result in big taxes if you sell.
🔧 Two Smart Trust Provisions You Should Consider
Even if you're not sure how estate tax law will evolve, you can build flexibility into your trust today. Here’s how:
1. Disclaimer Provisions
Allow the surviving spouse to shift assets into a different kind of trust after the first death to help manage estate tax exposure.
2. Trust Protector Provisions
Appoint a neutral third party who can modify the trust after it becomes irrevocable, adjusting for future tax law changes.
These tools give you options and agility, which are invaluable in an unpredictable tax environment.
📩 Final Thoughts
If you’re not “ultra-wealthy,” federal estate tax may not be your biggest concern right now—but:
State taxes could impact you more than you think
The exemption drop in 2026 could change everything
Smart planning today gives you peace of mind tomorrow
💬 Want to review your estate strategy?
If you live in Alabama, Florida, or Mississippi, I work directly with clients to create robust, flexible estate plans.
📅 Book a paid consultation (AL, FL, or MS only)
Found this helpful? Share it with a couple or family you know who might be crossing that $7 million line—or just trying to plan ahead smartly.
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