Estate Planning Calculator

Understanding Federal Estate Tax

Federal estate tax is a tax on the transfer of a large estate to heirs. It’s separate from income tax. Few estates owe it because of the high exemption, but for high-net-worth individuals, it’s critical to understand.

The 2025 Exemption

Single individuals: $13,610,000 (IRS Rev. Proc. 2024-61) Married couples: $27,220,000 (via portability)

Estates below these thresholds owe zero federal estate tax, regardless of size.

The Rate

Federal estate tax is a flat 40% on the taxable estate (the amount exceeding the exemption).

Example: $20M estate, single.

• Taxable = $20M − $13.61M = $6.39M
• Federal tax = $6.39M × 0.40 = $2.556M

A Worked Example

Scenario: You’re married with a $35M estate (home, investments, business). No major debts.

Using portability (both spouses’ exemptions):

• Net estate: $35M
• Combined exemption: $13.61M + $13.61M = $27.22M
• Taxable estate: $35M − $27.22M = $7.78M
• Federal estate tax: $7.78M × 0.40 = $3.112M

Without portability (if first spouse didn’t preserve unused exemption):

• Only $13.61M exemption available
• Taxable: $21.39M
• Tax: $8.556M (much higher!)

The TCJA Sunset: Critical 2026 Alert

The Tax Cuts and Jobs Act (2017) doubled the exemption to $13.61M, but this expires December 31, 2025.

On January 1, 2026, the exemption reverts to approximately $7M (adjusted for inflation).

Impact Example:

• $25M estate in 2025: Exempt, no tax
• Same $25M estate in 2026: Taxable amount = $25M − $7M = $18M; Tax = $7.2M

Congress may extend TCJA, but families should not assume it. If you have an estate over $7M, plan now.

Strategies to Reduce Estate Tax

Before 2026:

1. Annual gifts: Gift up to $18,000/person annually (2024), tax-free
2. Irrevocable life insurance trusts (ILIT): Remove life insurance proceeds from taxable estate
3. Grantor-retained annuity trusts (GRAT): Transfer appreciated assets at discounted values
4. Charitable planning: Donate appreciated securities or establish a Charitable Remainder Trust (CRT)

Ongoing:

1. Spousal transfers: Unlimited transfers between spouses during lifetime and at death (marital deduction)
2. Generation-skipping trust (GST): Transfer assets directly to grandchildren, using GST exemption
3. Family limited partnership: Own real estate via partnership, gift limited partner interests at discounts

State Estate Taxes

Many states impose their own estate taxes in addition to federal. New York has 3.06–16% on estates above $6.94M. Washington has 10–20% on estates above $2.193M. Check your state.

What Counts Toward Estate Value

• Primary residence
• Investment accounts
• Retirement accounts (IRA, 401k)
• Life insurance death benefits
• Business interests
• Art, jewelry, collectibles
• Digital assets

What You Should Do Now

1. Calculate your estate (use this calculator to estimate federal tax)
2. Consult an estate planning attorney (not a DIY job for large estates)
3. File Form 706 if estate exceeds exemption to preserve unused portion (portability)
4. Review beneficiary designations on IRAs, 401ks, life insurance
5. Update your will and consider trusts
6. Plan for TCJA sunset if estate will exceed $7M post-2026

Disclaimer: This calculator provides estimates only. Estate taxation is complex and highly individual. Federal and state rules differ. Professional guidance from an estate planning attorney and CPA is essential.

Related Calculators

Use the net worth calculator to inventory your estate. Check your tax bracket for income tax planning. Track wealth with the investment return calculator.

Sources: IRS Revenue Procedure 2024-61 (2025 estate tax exemption); Tax Foundation (state estate tax database).

Advanced Estate Planning Strategies

Portability Election

Portability allows married couples to combine exemptions. When the first spouse dies, their unused exemption transfers to the surviving spouse. This requires timely filing of Form 706 (estate tax return), even if no estate tax is owed. Failing to file forfeits the unused exemption—a costly mistake.

Example: First spouse dies with $3M estate. Exemption = $13.61M, so $10.61M is unused. If the couple lives in a state without state estate tax and doesn’t file, that $10.61M exemption is lost forever. If the surviving spouse later has a $25M estate, the combined federal exemption is only $13.61M instead of $27.22M—a tax bill of roughly $4.6M.

Dynasty Trusts

Some states allow perpetual dynasty trusts—trusts that never terminate, potentially lasting hundreds of years. Assets placed in a dynasty trust using your generation-skipping tax exemption ($13.61M in 2025) can benefit multiple generations without additional estate or GST tax. For ultra-high-net-worth families, dynasty trusts are powerful multi-generational planning tools.

Charitable Remainder Trusts (CRT)

A CRT lets you donate appreciated assets to charity while receiving income for life. You get a tax deduction for the present value of the ultimate charitable gift, avoid capital gains tax on the appreciated assets, AND receive steady income. At your death, the remainder goes to charity. Example: Donate $5M stock that costs basis of $1M to a CRT, receive ~4% income for life, avoid $800k in capital gains tax, and get a $2M+ charitable deduction.

Irrevocable Life Insurance Trusts (ILIT)

Life insurance death benefits are normally included in your taxable estate, creating a perverse incentive: the more life insurance you own “for your family,” the bigger your estate tax bill. An ILIT solves this by owning the insurance policy. When you die, the death benefit passes to the ILIT, outside your taxable estate. This is especially important for high-net-worth individuals with large life insurance policies.

Common Estate Planning Mistakes

1. Not updating beneficiaries: Beneficiary designations override your will. If an ex-spouse is still listed on a $500k life insurance policy, they get $500k even if your will says otherwise.

2. Letting probate happen: Assets in your individual name must go through probate (public, slow, costly). A revocable living trust avoids probate; all assets transfer outside the court system.

3. DIY wills: DIY wills are cheap but risky. A $300 online will might not be valid in your state, could trigger litigation, and might cost your estate $10k+ in unnecessary legal fees.

4. Joint ownership for everyone: Adding adult children as joint owners seems like a shortcut but creates creditor exposure (if your daughter is sued, creditors can attack joint assets) and tax complications.

5. Assuming you won’t owe estate tax: If Congress doesn’t extend TCJA, your $15M estate could owe $3.2M in federal + state tax. Waiting is a gamble.

6. Ignoring state estate tax: Several states have much lower exemptions than federal. A $10M estate might be safe federally but owe $1M+ in New York or Massachusetts state tax.

When You Definitely Need Professional Help

• Net worth > $5M
• Complex family (multiple marriages, stepchildren)
• Business ownership
• Real estate in multiple states
• Want to minimize estate tax for large assets
• Concerned about the TCJA sunset
• Have charitable intentions
• Want a dynasty trust or ILIT

Probate vs. Trusts: A Quick Comparison

Probate (Court-administered):

• Public process (anyone can see assets and heirs)
• Takes 6 months to 2+ years
• Costs 3-7% of estate value in legal/court fees
• Judges oversee execution
• No probate if all assets have beneficiaries or are in trusts

Revocable Living Trust:

• Private (no court involvement)
• Can be executed in weeks after death
• Costs ~$1-2k to set up, minimal ongoing cost
• Trustee (you named) executes quickly
• Survives probate court delays
• Can be changed anytime during life (revocable)

For most people with over $500k in assets, a revocable living trust is worth the upfront cost.

The Bottom Line

Estate planning isn’t just for the ultra-wealthy. If you have any substantial assets—$500k+ for middle-class families, $1M+ for most professionals—some basic planning makes sense. At minimum: a will, POA (power of attorney), healthcare directive, and updated beneficiary designations. For larger estates, consider a trust and tax-aware gifting strategy.

The cost of not planning: your estate pays 40% federal tax + state tax on amounts above the exemption, probate costs 3-7%, and distributions could be delayed 1-2 years. Professional planning ($1-3k) can save six figures easily.

Sources: IRS Revenue Procedure 2024-61 (2025 estate tax exemption); Tax Foundation (state estate tax database); Nolo.com Estate Planning Resource; American College of Trust and Estate Counsel (ACTEC).