Most married couples never pay federal estate tax, even with substantial assets
Federal estate tax affects very few married couples. In 2024, a married couple filing jointly can pass roughly $13.6 million to heirs before any federal estate tax applies. That threshold, called the federal estate tax exemption, is so high that fewer than 1 in 1,000 estates nationwide owe anything to the IRS.
The reason the number is so low: most couples don't accumulate $13.6 million in combined assets by the time both spouses have died. A home, retirement accounts, life insurance, and investments add up quickly, but they rarely reach that level. Even couples with significant wealth—a paid-off house worth $800,000, a $500,000 investment portfolio, and $300,000 in retirement savings—still fall well short.
What matters is the total value of everything you own at death: real estate, bank accounts, stocks, retirement accounts, life insurance proceeds, and business interests. Debts and funeral costs reduce the total, but most assets count toward the exemption threshold.
Key Takeaways
- Married couples can pass $13.6 million combined to heirs in 2024 without owing federal estate tax, and this threshold changes yearly.
- The exemption is scheduled to drop to roughly $7 million per person in 2026 unless Congress acts, which would affect more couples but still a small percentage.
- Some states impose their own estate or inheritance taxes at much lower thresholds, so your state matters as much as federal law.
- Couples with assets approaching the federal threshold should review their estate plan with an attorney, because the exemption is temporary and subject to change.
Why the federal exemption is so high right now
The current $13.6 million exemption per couple is temporary. It was set by the Tax Cuts and Jobs Act of 2017 and is scheduled to expire on December 31, 2025. When it expires, the exemption is set to drop to roughly $7 million per person (about $14 million for a married couple), adjusted for inflation. That lower threshold would still protect most couples, but it would catch more estates than today.
Congress could extend the higher exemption, lower it further, or let it revert as scheduled. Because the law is uncertain, couples with estates over $7 million should not assume the current exemption will still be in place when they die. An estate plan made today based on the $13.6 million threshold could need revision if the exemption shrinks.
State estate and inheritance taxes hit more couples
Federal estate tax is rare, but state-level taxes are more common and use much lower thresholds. Twelve states plus Washington, D.C., impose an estate tax. Massachusetts, Oregon, and Washington tax estates over $1 million. Connecticut, Delaware, Illinois, Maine, Maryland, New York, Rhode Island, and Vermont use thresholds between $2 million and $6 million. Hawaii taxes estates over $5.49 million.
Three states—Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania—impose an inheritance tax instead, which taxes the heirs who receive money rather than the estate itself. The rules and thresholds vary by state and by the relationship between the heir and the deceased.
If you live in or own property in a state with an estate or inheritance tax, your exposure is much higher than the federal threshold. A couple in Massachusetts with a $2 million estate would owe state tax but no federal tax. A couple in a state with no estate tax and the same $2 million estate would owe nothing.
How married couples can use both exemptions
When spouses file jointly, they can combine their exemptions. If one spouse dies first, their unused exemption can transfer to the surviving spouse through a process called portability. This means if the first spouse to die had a $13.6 million exemption and used only $3 million of it, the surviving spouse can use the remaining $10.6 million in addition to their own $13.6 million exemption.
Portability is automatic if the executor files the right form with the IRS, but it requires paperwork. Without it, the unused exemption is lost. Couples with substantial assets should make sure their estate plan includes language that preserves portability, and their executor needs to know to file the necessary return even if no tax is owed.
Couples with very large estates sometimes use trusts, life insurance strategies, or gifts during life to reduce the taxable estate. These tools are complex and expensive to set up, so they make sense only for couples whose combined assets clearly exceed the exemption threshold.
What counts toward the exemption
The exemption applies to the total value of your taxable estate. That includes your home, bank accounts, investment accounts, retirement accounts (though some have their own tax rules), life insurance proceeds, business interests, and valuable personal property like art or vehicles. It does not include assets you've already given away during life, up to annual limits.
Debts reduce your taxable estate. If you die owing $200,000 on a mortgage, that amount is subtracted from your home's value before calculating the estate tax. Funeral and administrative costs also reduce the taxable amount.
Some assets pass outside the estate and are not subject to estate tax at all—for example, money in a payable-on-death bank account, life insurance with a named beneficiary, or a retirement account with a named beneficiary. These assets go directly to the named person and bypass the estate entirely. That is one reason life insurance is often part of an estate plan: it provides liquidity and can pass to heirs without being taxed as part of the estate.
When you should talk to an estate attorney
If your combined assets are under $7 million, federal estate tax is unlikely to be a concern for your family. But if you live in a state with an estate tax, or if your assets are close to your state's threshold, an attorney can review your situation and suggest whether any planning makes sense.
If your combined assets exceed $7 million, or if you expect them to grow significantly, an estate plan review is worthwhile. An attorney can make sure your plan takes advantage of both spouses' exemptions, preserves portability, and accounts for the possibility that the exemption will shrink in 2026.
You should also review your plan if you've had major life changes—a significant inheritance, a business sale, a move to a different state, or a substantial increase in home value. These events can push you into a tax bracket you weren't in before.
Frequently Asked Questions
Does life insurance count toward the estate tax exemption?
Yes, life insurance proceeds count toward your taxable estate if you own the policy or if the policy is payable to your estate. If your spouse or an adult child owns the policy and you are the insured, the proceeds usually do not count toward your estate. This is one reason some couples use life insurance as part of their estate plan—it provides money to heirs outside the taxable estate.
If my spouse dies first, do I lose their unused exemption?
No, if your executor files the right IRS form (Form 706) within nine months of your spouse's death, you can use their unused exemption. This is called portability. Without the filing, the unused exemption is lost. Make sure your executor knows to file this form even if no federal estate tax is owed.
What happens to the exemption if Congress doesn't act before 2026?
The exemption is scheduled to drop to roughly $7 million per person on January 1, 2026. Congress could extend the current higher exemption, change it to a different amount, or let it drop as scheduled. Because the outcome is uncertain, couples with large estates should not assume the current exemption will still be in place when they die.
Do I owe estate tax if I live in a state with no estate tax?
You owe federal estate tax only if your estate exceeds the federal exemption ($13.6 million for a married couple in 2024). You owe state estate tax only if you live in or own property in a state that imposes it. Some couples owe state tax but no federal tax, and some owe neither. Your state matters.
Can my spouse and I give money to our children now to reduce our estate?
Yes, you can each give up to $18,000 per year per person (in 2024) without using any of your exemption. Larger gifts use your exemption. Gifts during life reduce your taxable estate at death, but they are complex and have tax consequences. An attorney can explain whether gifting makes sense for your situation.