Inheritance & Estate Tax Calculator

2026 Federal Estate Tax Overview

The estate tax is a transfer tax on the net value of a deceased person's estate. Most Americans never pay it because of the large exemption.

| Year | Exemption per Person | Top Rate | |------|---------------------|----------| | 2026 | $13,990,000 | 40% |

Married couples can combine exemptions via portability (DSUE election on Form 706), effectively shielding $27,980,000.

Critical 2026 planning note: The TCJA's doubled exemption is scheduled to sunset after December 31, 2025, potentially returning to roughly $7M per person in 2026 (inflation-adjusted). Legislative action could extend or make it permanent — monitor developments if your estate exceeds $7M.

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Key Deductions That Reduce Taxable Estate

| Deduction | Notes | |-----------|-------| | Debts & mortgages | Reduce gross estate directly | | Funeral expenses | Deductible | | Marital deduction | 100% of assets to US-citizen spouse | | Charitable deduction | 100% of gifts to qualifying charities | | Administration expenses | Legal, executor, and accounting fees |

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State Estate Taxes

About 12 states impose estate taxes with their own (often lower) exemptions. A Washington State resident dying with a $5M estate owes no federal estate tax but could owe up to $588,000 in state estate tax:

| State | Exemption | Top Rate | |-------|-----------|---------| | Massachusetts | $2,000,000 | 16% | | Oregon | $1,000,000 | 16% | | Washington | $2,193,000 | 20% | | New York | $6,940,000 | 16% | | Illinois | $4,000,000 | 16% | | Maryland | $5,000,000 | 16% |

Maryland also has a separate inheritance tax (10%), making it the only state with both.

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Annual Gifting Strategy

The annual gift tax exclusion in 2026 is $18,000 per recipient ($36,000 per recipient for married couples using gift-splitting). Gifts within this limit do not count against your lifetime exemption.

A couple with 3 children and 6 grandchildren can gift $36,000 × 9 people = $324,000 per year completely tax-free, removing assets from the estate and all future appreciation thereon.

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Advanced Estate Reduction Strategies

Irrevocable Life Insurance Trust (ILIT): The trust owns a life insurance policy. Proceeds pass to beneficiaries estate-tax-free — outside your taxable estate.

Grantor Retained Annuity Trust (GRAT): You transfer assets to a GRAT and receive annuity payments for a fixed term. Assets remaining at the end of the term pass to heirs with minimal gift tax. Most effective when assets appreciate above the IRS hurdle rate (7520 rate).

529 Plan Superfunding: Contribute up to 5 years of gift tax exclusions at once ($90,000 per recipient / $180,000 for couples) without gift tax consequences. Removes assets from estate while funding education.

Charitable Remainder Trust (CRT): You transfer assets to the trust, receive income for life, and the charity receives the remainder. You get a current charitable deduction and remove the asset from your estate.

Step-Up in Basis: Inherited assets receive a stepped-up cost basis to fair market value at date of death, eliminating embedded capital gains. Holding highly appreciated assets until death (rather than gifting during life) can be more tax-efficient for heirs if estate taxes are not a concern.