Estate Tax Calculator — Federal Estate Tax Exposure

Understanding Federal Estate Tax Exposure

The federal estate tax applies to the total value of a deceased person's assets above the lifetime exemption amount. Under current law, the exemption is $13.61 million per individual (2024), but this is scheduled to revert to approximately $7 million in 2026 when the Tax Cuts and Jobs Act provisions expire. Estates exceeding the exemption are taxed at a flat 40% rate on the excess. This calculator estimates your tax exposure by adding life insurance proceeds to your estate value, subtracting charitable bequests and the applicable exemption, then applying the 40% rate.

Married couples benefit from portability, which allows a surviving spouse to use the deceased spouse's unused exemption amount, effectively doubling the combined exemption without requiring trust planning. However, portability must be elected by filing a timely estate tax return (Form 706) for the first spouse to die, even if no tax is owed. Life insurance proceeds are included in your taxable estate if you own the policy, which catches many families off guard -- a $2 million term policy can push an otherwise exempt estate into taxable territory.

Common estate planning strategies to reduce tax exposure include making annual exclusion gifts ($18,000 per recipient in 2024), establishing an Irrevocable Life Insurance Trust (ILIT) to remove insurance proceeds from the estate, creating Grantor Retained Annuity Trusts (GRATs) to transfer appreciating assets at reduced gift tax cost, and charitable remainder trusts that provide income during life with the remainder going to charity. With the exemption potentially dropping by half in 2026, families with estates between $7 million and $13 million should review their plans with an estate attorney now.