Deadlines & Filing
Estate tax is a tax on the transfer of certain property after a person dies. Learn how the federal estate tax works, who may need to file Form 706, how the $15 million 2026 exclusion applies, what deductions and portability mean, and why state estate and inheritance taxes can also matter.
Estate tax is a federal tax imposed on the transfer of certain property and assets after a person dies. Unlike an inheritance tax, which is generally imposed on the person receiving an inheritance, an estate tax is calculated based on the taxable estate of the deceased person before assets are distributed to beneficiaries.
For many families, the federal estate tax never becomes an issue because the federal law allows a substantial amount of property to pass free of federal estate tax. For a person who dies in 2026, the federal basic exclusion amount is $15 million. An estate generally must file a federal estate tax return when the value of the gross estate, together with certain adjusted taxable gifts, exceeds the applicable filing threshold. A return may also be filed when an estate wants to transfer unused estate-tax exclusion to a surviving spouse through portability.
Estate tax can nevertheless become an important estate-planning issue for individuals and families with substantial assets, business interests, real estate, investments, life insurance, or property located in more than one state or country. State estate and inheritance taxes can also create tax obligations even when no federal estate tax is due.
Understanding how estate tax works can help people identify whether their estate may face a tax liability, what deductions or exclusions may apply, and why estate planning can matter long before death.
An estate tax is a tax on the transfer of property at death. The federal estate tax applies to the taxable estate of a person who dies, rather than simply taxing the amount each beneficiary receives.
The IRS generally begins with the person's gross estate and then applies allowable deductions and other adjustments to determine the taxable estate. Property included in the gross estate can include real estate, cash, stocks, bonds, business interests, certain life insurance, and other assets owned or controlled by the decedent under federal estate-tax rules.
The federal estate tax is separate from income tax. It is also different from inheritance tax.
For example, suppose a person dies owning a substantial investment portfolio, real estate, and a business. The estate-tax analysis generally looks at the value of property included in the person's gross estate and then determines what deductions and exclusions are available. It does not simply ask how much money each child or other beneficiary receives.
The estate tax is therefore primarily concerned with the transfer of wealth from one generation or person to another at death.
The federal estate tax system involves several steps.
First, the executor determines which assets and interests are included in the decedent's gross estate. Those assets are generally valued as required under federal estate-tax rules, often using their fair market value as of the date of death, although an alternate valuation election may be available in qualifying circumstances.
Next, the executor determines which deductions may be available. Depending on the circumstances, deductions can include certain debts and expenses, charitable transfers, and qualifying transfers to a surviving spouse.
The resulting amount is used to determine the taxable estate. The estate then applies the applicable exclusion and available credit to determine whether federal estate tax is actually payable.
This distinction is important because the value of the gross estate is not necessarily the same as the amount subject to estate tax.
An estate may contain significant property while still having no federal estate tax liability because deductions and the federal exclusion reduce the taxable amount.
People often use the term "estate tax exemption" to describe the federal basic exclusion amount.
For deaths occurring in 2026, the federal basic exclusion amount is $15 million. The IRS also identifies $15 million as the 2026 federal estate-tax filing threshold for U.S. citizens and residents, subject to the rules involving adjusted taxable gifts and other amounts included in the filing calculation.
This does not mean that every person with an estate worth $15 million or less can simply ignore estate-tax planning.
For one thing, the filing threshold is determined under specific federal rules rather than by looking only at the current balance of a person's bank accounts. Adjusted taxable gifts and other amounts can affect the filing calculation.
In addition, state estate and inheritance taxes may apply at much lower levels.
Finally, some estates below the mandatory filing threshold may still benefit from filing an estate tax return, particularly when a surviving spouse may benefit from a portability election.
Not every estate has to pay federal estate tax.
For a U.S. citizen or resident who dies in 2026, Form 706 generally must be filed when the gross estate, increased by adjusted taxable gifts and the specific gift-tax exemption as applicable under the filing rules, exceeds $15 million. A return can also be required when the executor elects portability of a deceased spouse's unused exclusion, even when the estate itself is below the filing threshold.
But filing an estate tax return and owing estate tax are not necessarily the same thing.
An estate may have a filing obligation but ultimately owe no federal estate tax because deductions, credits, or the applicable exclusion eliminate the tax.
For example, an estate might exceed the filing threshold but have substantial qualifying deductions. The executor would still need to properly calculate and report the estate's tax position.
Because the calculation involves federal tax rules, estates near or above the filing threshold should generally obtain professional advice rather than relying on a simple estimate of the estate's assets.
The gross estate can include much more than money sitting in a person's checking or savings accounts.
Depending on the circumstances, property included in the federal gross estate may include:
The IRS explains that gross-estate assets can include real estate, cash, securities, businesses, and decedent-owned life insurance policies, among other property.
This is why estate-tax planning requires a complete inventory of assets rather than simply checking a person's investment account balance.
For someone who owns a closely held business, multiple properties, valuable investments, or substantial life insurance, the estate-tax calculation may require detailed valuation and documentation.
Federal estate-tax rules generally require assets included in the estate to be valued according to their fair market value at the relevant valuation date.
For many assets, valuation may be relatively straightforward. Publicly traded securities, for example, generally have readily available market information.
Other assets can be much harder to value.
A privately held business may require a professional valuation. Real estate may require an appraisal. Valuable artwork, collectibles, intellectual property, partnership interests, and other unusual assets may also require specialized valuation.
The IRS Form 706 instructions generally require property to be valued as of the date of death unless the executor makes an election for an alternate valuation when permitted.
Accurate valuation matters because an incorrect valuation can affect both the estate's filing obligation and its eventual tax calculation.
Federal law allows certain deductions that can reduce the amount of property subject to estate tax.
Common categories include deductions for qualifying:
The exact requirements for each deduction can be technical.
For example, administration expenses may be deductible for federal estate-tax purposes, but the tax rules can also allow certain expenses to be deducted for the estate's income-tax purposes. The same expense generally cannot simply be deducted twice for both purposes.
The marital and charitable deductions can also be significant in estate planning.
The federal estate-tax system generally allows a deduction for qualifying property passing to a surviving spouse.
This is known as the marital deduction.
The deduction can allow qualifying property to pass to a surviving spouse without being subject to federal estate tax at the first spouse's death, although that does not necessarily mean the property will never be subject to estate tax.
Property may later be included in the surviving spouse's estate depending on how the property was structured and what happens at the surviving spouse's death.
Special rules can also apply when the surviving spouse is not a U.S. citizen. For example, a qualified domestic trust, commonly called a QDOT, can be relevant in certain circumstances involving a noncitizen surviving spouse. The IRS Form 706 instructions contain specific rules concerning QDOTs and portability.
Estate planning for married couples therefore often requires looking at both spouses' estates rather than treating each death as a completely separate event.
Qualifying charitable transfers can generally receive an estate-tax deduction.
Property passing to an eligible charitable organization may therefore reduce the taxable estate.
Charitable planning can involve outright gifts at death as well as certain trust structures and other arrangements. The applicable tax treatment depends on the structure of the transfer and whether the legal requirements for the deduction are satisfied.
For people who already intend to make substantial charitable gifts, incorporating those gifts into an estate plan can be an important part of evaluating potential estate-tax exposure.
Estate tax and inheritance tax are often confused, but they are different taxes.
An estate tax is generally imposed on the taxable estate of the deceased person before property is distributed.
An inheritance tax is generally imposed on the person receiving inherited property.
The federal government imposes an estate tax, not a general federal inheritance tax.
Some states impose their own estate taxes, while others impose inheritance taxes. Maryland has both types of state-level tax. State rules can vary significantly based on the size of the estate, the beneficiary's relationship to the deceased person, and other factors.
This distinction matters because a person could potentially face a state-level death tax even when the federal estate-tax exemption is large enough to eliminate federal estate tax.
No.
Federal estate tax rules apply throughout the United States, but state-level estate and inheritance taxes depend on the state.
As of January 1, 2026, 12 states and the District of Columbia impose estate taxes, while several states impose inheritance taxes. Maryland imposes both an estate tax and an inheritance tax.
State exemptions can be substantially lower than the federal $15 million exclusion.
For example, the 2026 state estate-tax exemptions listed by the Tax Foundation range from $1 million in Oregon to $15 million in Connecticut, with several other states having exemptions between those amounts. Washington's estate-tax system has a top rate of 35%, while several states have top rates of 16% or lower.
These figures demonstrate why estate planning cannot rely solely on the federal exemption.
A person with a $4 million estate might have no federal estate tax issue but could face a state estate-tax question depending on where the person is domiciled and where assets are located.
State rules can also change, so current state law should be checked when evaluating a particular estate.
No.
Estate tax and probate address different legal issues.
Probate is a court-supervised process that can be used to administer certain assets after someone dies. It may involve validating a will, identifying assets, paying debts, resolving claims, and distributing property.
Estate tax is a tax issue involving transfers at death.
An estate can go through probate without owing federal estate tax. Conversely, an estate may have estate-tax obligations even when some or much of its property passes outside probate.
For example, certain beneficiary-designated accounts, jointly owned property, and trust assets may pass outside the probate process while still potentially being relevant to the federal estate-tax calculation.
This is why avoiding probate and reducing estate taxes are not the same estate-planning objective.
Life insurance can create an important estate-tax planning issue.
The fact that a policy pays a death benefit to a beneficiary does not automatically mean the proceeds are excluded from the deceased person's gross estate for federal estate-tax purposes.
For example, the IRS includes certain decedent-owned life insurance in the gross estate. The precise treatment depends on factors such as ownership and the decedent's rights in the policy.
This can be surprising for families who assume that life insurance is always outside the estate simply because it passes directly to a beneficiary.
Life insurance can also be used as part of broader estate planning, including planning for liquidity. However, the structure and ownership of the policy matter.
For substantial estates, an attorney or tax professional may evaluate whether an existing policy creates estate-tax exposure and whether changes in ownership or trust planning should be considered.
Estate planning and gift planning are closely connected.
Federal law has both gift-tax and estate-tax rules, and certain lifetime transfers can affect the amount of exclusion available at death.
For 2026, the federal annual gift-tax exclusion is $19,000 per recipient per donor, subject to the applicable rules. The annual exclusion is separate from the broader lifetime basic exclusion amount.
A person can therefore potentially make qualifying annual-exclusion gifts to multiple recipients without those gifts using the person's lifetime exclusion, provided the gifts meet the requirements.
However, not every transfer is an annual-exclusion gift. Gifts of future interests and other transfers can require different treatment.
A gift that exceeds the annual exclusion does not necessarily mean the donor immediately owes gift tax. A taxable gift may instead use part of the donor's lifetime applicable exclusion, depending on the circumstances.
Because lifetime gifts can affect the eventual estate-tax calculation, large gifting programs should be evaluated as part of an overall estate plan rather than treated as isolated transactions.
Not automatically.
Giving away property during life can have tax consequences of its own, and certain lifetime gifts are taken into account when determining federal estate-tax liability.
A person cannot simply assume that transferring an asset shortly before death will remove the asset from every tax calculation.
The federal estate and gift tax system is designed to work together, and the Form 706 calculation takes certain adjusted taxable gifts into account.
There may be legitimate estate-planning reasons for making lifetime gifts, including transferring appreciating assets, providing financial assistance to family members, or using available gift-tax exclusions.
But the tax consequences can depend on the type of property, its value, when it was transferred, the recipient, and the structure of the transaction.
Large lifetime gifts should therefore be coordinated with the person's overall estate plan.
Portability allows a surviving spouse to potentially use the unused federal estate-tax exclusion of the deceased spouse.
The unused amount is known as the deceased spousal unused exclusion, or DSUE.
For example, if a spouse dies in 2026 without using the entire applicable exclusion and the executor properly elects portability, the surviving spouse may potentially use the deceased spouse's unused exclusion for certain future taxable transfers.
The election generally requires a timely and complete Form 706. The IRS states that the return is generally due nine months after death, with an extension of up to six months available through Form 4768.
Importantly, an estate may file Form 706 for portability even when the estate itself is not otherwise required to file an estate-tax return.
Under a special IRS procedure, certain estates that were not otherwise required to file can generally make a late portability election by filing Form 706 within five years of the decedent's death if the requirements of Revenue Procedure 2022-32 are satisfied.
Portability can therefore be an important issue for married couples even when the first spouse's estate is well below the federal exemption.
Form 706 is the federal United States Estate and Generation-Skipping Transfer Tax Return.
For a U.S. citizen or resident who dies in 2026, the IRS states that Form 706 generally must be filed when the gross estate plus applicable adjusted taxable gifts and other amounts included under the filing rules exceeds $15 million.
A Form 706 may also be filed to make the portability election for a surviving spouse regardless of the size of the estate.
The filing deadline is generally nine months after the date of death.
An executor can request an automatic six-month extension of time to file by using Form 4768. An extension of time to file is not necessarily the same thing as an extension of time to pay tax. The IRS states that estate and generation-skipping transfer taxes are generally due within nine months after death, subject to applicable extension rules.
Because missing a filing deadline can affect important estate-tax elections, executors should identify filing obligations promptly after a death.
Estate-tax liability can sometimes create a liquidity problem.
An estate may be worth millions of dollars but still have relatively little cash available to pay expenses and taxes.
This can happen when a person's wealth is concentrated in:
An estate may therefore need to sell assets, borrow money, use insurance proceeds, or explore other lawful planning and payment options.
Federal law also provides an installment-payment mechanism in certain circumstances for qualifying closely held business interests. The requirements are technical, and interest can apply. The Form 706 instructions contain specific rules for estates seeking installment treatment.
Estate planning can address liquidity before death by considering the types of assets owned and how estate expenses and taxes could be funded.
A family business can create special estate-tax and succession issues.
The business may represent a substantial portion of the owner's estate while producing limited immediately available cash. If estate taxes become payable, the executor and beneficiaries may need to determine how the liability will be funded.
Estate planning for business owners can involve:
The objective is not simply to determine who inherits the business. The plan should also consider how the business will be managed, valued, funded, and transferred.
Estate-tax rules can be especially important for people who are neither U.S. citizens nor U.S.-domiciled residents but own property in the United States.
The federal government can impose estate tax on certain U.S.-situated assets owned by a nonresident who is not a U.S. citizen.
Examples of potentially U.S.-situated assets include U.S. real estate, certain tangible personal property located in the United States, and stock of corporations organized under U.S. law.
The filing threshold is much lower for certain nonresident noncitizen estates.
The IRS states that Form 706-NA generally must be filed when the date-of-death value of the decedent's U.S.-situated assets, together with relevant adjusted taxable gifts and the applicable specific exemption, exceeds $60,000.
Estate-tax treaties between the United States and other countries can modify the treatment in certain situations, so international estates require particularly careful analysis.
No.
Estate tax concerns the transfer of property at death. Income tax generally concerns income earned or recognized by the estate, beneficiaries, or other taxpayers.
An inheritance itself is generally not treated the same way as ordinary income simply because someone received property after a person's death. However, property inherited from a decedent can have important income-tax consequences later.
For example, an inherited asset may later be sold, and the tax consequences of that sale depend on the property's applicable tax basis and other rules.
The estate may also earn income after death. An estate that generates sufficient income can have an income-tax filing obligation, generally involving Form 1041 rather than Form 706.
Estate tax and estate income tax should therefore be treated as separate parts of the administration process.
A trust can be an important estate-planning tool, but creating a trust does not automatically eliminate estate tax.
Different trusts have different tax consequences.
A revocable living trust, for example, is commonly used for estate administration and management purposes, but assets in a revocable trust may still be included in the grantor's taxable estate.
Other irrevocable trust structures can have different estate-tax consequences because the person may give up certain ownership rights or control.
The tax treatment depends on the type of trust, its terms, the assets involved, retained powers, beneficiaries, and applicable federal and state law.
Trust planning should therefore be based on a specific estate-planning objective rather than the assumption that "a trust means no estate tax."
Estate-tax planning is highly individualized, but several strategies are commonly considered when an estate may face significant tax exposure.
Qualifying gifts can move property out of a person's estate while also providing financial benefits to family members or other recipients. Annual exclusions and lifetime gift-tax rules may be relevant.
Certain irrevocable trusts can be structured to address estate-tax, asset-management, or beneficiary-planning objectives.
Charitable gifts can potentially reduce the taxable estate while accomplishing philanthropic goals.
Business owners may use ownership structures, buy-sell arrangements, valuations, and other planning tools to prepare for a future transfer.
Life insurance can provide liquidity for estate expenses and taxes, although policy ownership and beneficiary arrangements must be considered carefully.
Married couples may consider whether a portability election should be made after the first spouse dies.
The appropriate combination depends on the person's assets, family circumstances, state of residence, business interests, charitable goals, and projected future wealth.
Estate-tax problems are not always caused by failing to create an elaborate tax strategy. Sometimes they result from failing to coordinate basic estate-planning documents and assets.
A person may focus entirely on the $15 million federal exclusion while overlooking a much lower state exemption.
Marriage, divorce, births, deaths, relocation, business changes, and major changes in wealth can affect an estate plan.
Life insurance can represent a substantial amount of wealth and may have estate-tax implications depending on ownership and other circumstances.
Retirement accounts and insurance policies often pass according to beneficiary designations rather than the instructions in a will. Those designations should be coordinated with the overall estate plan.
Lifetime gifts can have consequences involving gift tax, estate tax, income-tax basis, and other issues.
Estate-tax planning is generally more flexible when considered before a crisis. Last-minute transfers can create valuation, legal, tax, and administrative complications.
A trust's tax treatment depends on its structure and the rights retained by the person who created it.
Not everyone needs an advanced estate-tax strategy.
However, professional estate-tax planning may be particularly relevant for people who:
Even if an estate is currently below the federal threshold, future growth can change the analysis.
For example, a business that is worth several million dollars today could become significantly more valuable over a person's lifetime. Real estate and investment assets can also appreciate.
Estate planning can therefore involve looking at both today's estate and reasonable future scenarios.
The first step is usually to understand what you own.
Create an inventory of:
Next, determine approximate current values and identify ownership.
Ownership matters because an asset's tax treatment may depend on whether it is individually owned, jointly owned, held through an entity, placed in a trust, or subject to another legal arrangement.
You should also review existing wills, trusts, powers of attorney, beneficiary designations, and other estate-planning documents.
Then consider your state's estate and inheritance tax rules.
Finally, if your estate could be subject to federal or state estate tax, consider consulting an estate-planning attorney and qualified tax professional. Estate-tax planning often involves both legal and tax considerations, and changes to one part of an estate plan can affect another.
An estate plan should not necessarily be treated as something that is created once and then forgotten.
A review may be appropriate after major events such as:
Tax laws can change, too. The federal basic exclusion amount for 2026 is $15 million, but future years can have different inflation-adjusted amounts or legislative changes.
State laws can also change independently of federal law.
Regular reviews can help ensure that the estate plan continues to match the person's assets and goals.
Estate tax is a federal tax associated with the transfer of wealth at death. It is generally calculated from the taxable estate after applying applicable deductions, exclusions, credits, and other rules. The federal system is separate from state estate taxes and inheritance taxes, which can apply under different rules.
For people who die in 2026, the federal basic exclusion amount is $15 million. Estates above the applicable filing threshold generally must file Form 706, while some estates below the threshold may also file to elect portability for a surviving spouse.
The federal exemption is only one part of estate-tax planning. The value and ownership of real estate, investments, businesses, life insurance, trusts, and other property can affect the estate-tax calculation. Lifetime gifts can also affect the eventual estate-tax analysis.
State law is another important consideration. Several states and the District of Columbia impose estate taxes, while some states impose inheritance taxes. Their exemptions and rates can differ substantially from federal rules.
Estate-tax planning is therefore most effective when it is coordinated with the rest of an estate plan. Reviewing assets, ownership structures, beneficiary designations, trusts, charitable plans, business interests, and tax obligations can help identify potential issues before they become difficult to address.
Because estate-tax rules are technical and can change over time, individuals with substantial or complicated estates should consider obtaining advice from qualified estate-planning and tax professionals who can apply the law to their particular circumstances.
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