The federal estate tax exemption is high. For 2025 it sits north of thirteen million dollars per person, which means a married couple can pass roughly twenty-seven million dollars to heirs before the federal government takes a dollar. The vast majority of American families fall well below that threshold, and the fear that the IRS will take a large bite of an ordinary estate is largely misplaced — at the federal level.
State law is a different conversation. A growing list of states impose their own estate or inheritance taxes, often with exemption levels far lower than the federal one — sometimes as low as one or two million dollars, sometimes structured as inheritance taxes that apply based on the beneficiary's relationship to the deceased. Where you live and where your heirs live both matter.
The current federal exemption is also scheduled to roughly cut in half under existing law unless Congress acts. Families approaching the exemption threshold should be modeling the scenario where the cliff happens — and considering whether to use the higher exemption while it's available. This is one of the narrower areas of planning where the right answer can move by millions, and where having an advisor who tracks the rules pays for itself many times over.
Educational content only. Nothing in this lesson constitutes legal, tax, or investment advice. Insurance products are governed by the policy contract issued by the carrier.