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Estate / Inheritance Tax Exposure — Federal, Marital, Charitable

Most people misunderstand US estate tax. Only estates above the federal exemption (~$13.6M in 2024, scheduled to drop to ~$7M in 2026) owe any federal tax. But state estate / inheritance tax kicks in at much lower thresholds. This tool shows the federal picture and lets you see how the marital and charitable deductions reduce exposure.

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Estate

State estate / inheritance tax not modeled. Six states (MA, NY, OR, RI, VT, WA) and DC have their own estate tax with lower exemptions. Many states have inheritance tax with exemptions based on the heir's relationship.

Federal estate tax

Taxable estate (after deductions)
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Federal estate tax
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Lifetime exemption used
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Exemption remaining
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Tax-efficient transfer order

When you have a finite exemption and multiple goals, the order matters. This is the conventional wisdom for high-net-worth estate planning.

  1. Spouse first, unlimited marital deduction (US citizen spouse) — no tax, no exemption used.
  2. Charity, unlimited charitable deduction — no tax, no exemption used.
  3. Annual exclusion gifts ($18k per recipient in 2024) — no tax, no exemption used.
  4. Lifetime exemption for the rest — tax-free up to the cap.
  5. Above the exemption — 40% federal estate tax.

Trust walkthrough

A revocable living trust doesn't reduce estate tax — assets in it are still in your estate. An irrevocable trust (ILIT, GRAT, dynasty) can remove assets from your estate, but you give up control. This tool doesn't model trusts but flags the most common decision: which assets to put in which bucket.

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The 2026 exemption cliff is the most important number on this page

The Tax Cuts and Jobs Act of 2017 roughly doubled the federal estate tax exemption, but only through 2025. Without congressional action, the exemption is scheduled to drop by ~50% in 2026 — from ~$14M to ~$7M per person. A household with $20M today may have zero estate tax; the same household in 2026 may face a $1M+ tax bill. The 2026 planning window is open now.

FAQ

What if my spouse isn't a US citizen?

The unlimited marital deduction only applies to US-citizen spouses. A non-citizen spouse qualifies for a $185,000 annual exclusion (2024). Above that, the standard QDOT (Qualified Domestic Trust) mechanism can defer tax until the non-citizen spouse dies.

Is life insurance in my estate?

Yes, if you own the policy on your own life. The classic fix is an Irrevocable Life Insurance Trust (ILIT) that owns the policy. The death benefit is then outside the estate, providing liquidity to pay any tax owed. This calculator does not include life insurance as an asset; add its face value to gross estate if applicable.

Why isn't state estate tax modeled?

Because each state's calculation is its own beast — different exemptions, different rates, different portability rules. If you live in MA, NY, OR, RI, VT, WA, or DC, your state estate tax may apply at a $1M-$5M exemption. This tool shows the federal layer; add your state's calculation separately.

Methodology

Taxable estate = (gross − debts − marital deduction − charitable deduction) + prior taxable gifts. Federal estate tax applies if taxable estate exceeds the exemption. The tax is computed on the excess using a graduated schedule with a 40% top rate (after a unified credit that effectively shelters the exemption). Source: IRS Form 706 instructions, IRC §2001, §2010, §2056, §2055.