Tax Considerations

Last Updated: June 10, 2026

As you plan for your estate, taxes are huge. They can reduce the value of the assets you pass on to your heirs and affect you while you’re alive.

Gift Tax

Over the course of your lifetime, you can annually gift to each loved one $19,000 (in 2026)¹ without paying a gift tax. It’s important to note that the gift tax is paid by the giver, not the recipient. Before making a gift larger than the annual gift tax exclusion, you will want to consider other potential tax and reporting requirements.

For married people, it’s possible to double what you give to others. When you have a joint tax return, you each can give $19,000 to a person. So, the total of the exemption rises to $38,000 in 2026. If you are concerned about reducing the total value of your estate, using gifts over time, as long as you stick to the annual limits, can be a way to keep it below the combined marriage estate exemption amount of $30 million.²

Beware of estate planning mistakes like joint ownership with someone other than a spouse. If you add someone else to a property, it could be considered a gift, and the equity they end up with could exceed the gift tax limit — causing tax headaches. Additionally, your home might then be open to the other person’s creditors if they are a co-owner of the asset.

Also, if you gave a loan to a family member or friend, make sure that the loan was made with a written agreement, a fixed repayment schedule, and a minimum interest rate set by the IRS called the “Applicable Federal Rate” so the IRS does not mistake it as a gift and charge you taxes on it.

Estate Tax

When you leave your loved ones your estate, the IRS allows $15 million per person in 2026, bringing the total for married couples to $30 million.³ The assumption is that your surviving spouse will retain the estate when you pass. As a result, anything that goes to your spouse won’t be subject to federal estate taxes (state estate tax rules might be different). 

Over time, and when your surviving spouse dies, you won’t have had previous taxes reduce the amount that goes to your beneficiaries.

Qualified Charitable Distributions

If you have reached an age to take required minimum distributions (RMDs), you can use qualified charitable distributions to meet the criteria and reduce your taxable income. See our class on the SECURE Act 2.0 for updates to RMDs and other topics.

When you make a qualified charitable distribution (or QCD) from an affected retirement account, you don’t have to worry about it counting as taxable income. This strategy pulls double duty by reducing your tax liability while helping you meet your RMD requirement. Using this strategy, you can donate up to $100,000 annually over your lifetime.⁴

State Taxes

Don’t forget that each state has its own laws regarding estate planning and taxes. For example, in addition to federal estate taxes, some states, like Washington, Minnesota, Maine, and Vermont, among others, have their own estate taxes.⁵ Estate taxes are paid by your estate, coming off the top before your assets are distributed to your heirs. Usually, the exemption for state estate taxes is much lower than the federal exemption.

On top of separate estate taxes, five states — Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania — levy an inheritance tax.⁶ Inheritance taxes are paid by the recipient(s) of your estate and are based on the amount each beneficiary receives rather than being paid by your estate. Only Maryland levies both an estate tax and an inheritance tax.

Check with the state to see how your marital situation might impact your estate or inheritance taxes. In many cases, spouses don’t have to worry about these taxes. However, if you’re single or involved in a partnership that isn’t recognized as marriage by your state, your heirs could end up stuck with these taxes — and receive less from your estate as a result.

If you decide to move to a state that has estate and/or inheritance taxes, you might need to adjust your planning. You can also find out if a trust can protect your estate in these states. Our class “Taxes on Inherited Accounts” offers more in-depth information.  

Federal Taxes

When you die, the federal government levies an estate tax on your assets that you own in excess of $15 million (2026) in value.⁷ However, as a married couple, that amount increases to $30 million.

Any amount of the $15 million estate exemption you do not use can be given to your surviving spouse, who can add it to their estate tax exemption when they die. In other words, your estate tax exemption is “portable” to your surviving spouse.  

For example, if you die and your portion of the estate is worth $14 million, that remaining $1 million can be added to your spouse’s exemption, so your spouse’s estate only has to pay taxes on amounts beyond $16 million. This allows you and your spouse to plan ahead. You might also be able to use certain types of trusts to help you reduce the amount owed in estate taxes. 

SOURCES

1. “IRS releases tax inflation adjustments for tax year 2026 Including Amendments from the One Big Beautiful Bill.” IRS.gov, 9 October 2025, https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill,  Accessed 26 December 2025.
2. “Estate Tax.” IRS, 22 December 2025, https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax. Accessed 26 December 2025.
3. Ibid.
4. “Publication 590-B (2022), Distributions from Individual Retirement Arrangements (IRAs).” IRS, 10 September 2024, https://www.irs.gov/publications/p590b#en_US_2020_publink100041439. Accessed 26 December 2025.
5. Loughead, Katherine. “Estate and Inheritance Taxes by State, 2025.” Tax Foundation, 28 October 2025, https://taxfoundation.org/data/all/state/estate-inheritance-taxes/. Accessed 10 June 2026.
6. Ibid.
7. “Estate Tax.” IRS, 22 December 2025, https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax. Accessed 26 December 2025.