Does Every Estate Have To Pay An Estate Tax?

Most clients I work with voice concern about the amount of federal estate taxes that their families will have to pay after their death.

They have heard about the “death tax” and worry that the government will end up with their hard-earned wealth, or that their estates won’t be liquid enough to pay those taxes, forcing their families to sell property just to satisfy the IRS.

The good news is that the vast majority of Americans have nothing to worry about.

Estate Tax Basics

The federal government imposes an estate tax on the transfer of a decedent’s “taxable estate” to heirs and beneficiaries. To calculate the taxable estate, you add up the fair market value of all assets owned at death — including real estate, investments, and life insurance — and then subtract debts, funeral expenses, and any assets passing to a surviving spouse or qualified charity.

The Federal Estate Tax Exemption in 2025

Although every U.S. citizen is technically subject to the estate tax, very few estates actually owe it. That’s because each person’s estate benefits from a federal estate and gift tax exemption, an amount that can be passed free of federal estate tax.

In 2025, the exemption is $13.99 million per person (or $27.98 million for married couples).

Beginning in 2026, the exemption will increase to $15 million per person (or $30 million for married couples), with future increases tied to inflation.

Any portion of the exemption not used by the first spouse to die can be transferred to the surviving spouse — a benefit known as “portability.”

Only the value of assets exceeding these thresholds is subject to estate tax, which maxes out at 40% tax rate for amounts higher than $1 million over the exclusion amount.

What This Means in Practice

At today’s levels, more than 99.9% of Americans will never owe federal estate tax. For example:

If an individual dies in 2025 with an estate valued at $10 million, no estate tax is due because the estate falls under the $13.99 million exemption.

A married couple can pass nearly $28 million tax-free in 2025, and $30 million starting in 2026.

This means only ultra-high-net-worth families need to engage in advanced estate tax planning to minimize exposure.

Why Estate Planning Still Matters

Even though most families will never face federal estate tax liability, estate planning is still essential. A well-drafted estate plan ensures:

• Your assets pass according to your wishes rather than state intestacy laws.
• Guardians you select will care for your children.
• Probate is simplified or avoided where possible.
• You can thoughtfully plan for income tax, state tax, and capital gains tax exposure.

For high-net-worth individuals, the current exemption levels provide a powerful opportunity to transfer wealth strategically. But it’s important to remember that tax laws can change, and future Congresses may lower the exemption.

Key Takeaway

While the estate tax remains one of the most disliked taxes in America, the reality is that very few families will ever pay it under today’s generous exemption levels. Still, whether your estate is large or modest, planning ahead is the best way to protect your loved ones and ensure your property passes according to your wishes.

This article was originally published on December 12, 2012 and updated on September 1, 2025,