Federal Estate Tax Exemption
The amount a US individual can transfer at death (and via lifetime gifts) without federal estate or gift tax, indexed annually for inflation and now set at $15 million per person under OBBBA.
Detailed Explanation
The lifetime unified credit covers gifts and transfers at death. OBBBA permanently set the exemption at $15 million per individual ($30 million per couple) starting in 2026, indexed annually. The annual gift tax exclusion ($19,000 per recipient for 2025) is separate from the lifetime exemption. Portability allows a surviving spouse to use the deceased spouse's unused exemption (DSUE) by filing Form 706 within nine months of death. Generation-skipping transfer (GST) tax is a parallel regime applying to transfers to grandchildren and unrelated persons two or more generations younger.
Key Points
- OBBBA set the lifetime exemption at $15 million per person ($30 million per couple) from 2026, indexed.
- The exemption is unified, covering both lifetime gifts and transfers at death.
- The annual gift exclusion ($19,000 per recipient for 2025) is separate and does not use lifetime exemption.
- Portability lets a surviving spouse claim the deceased spouse's unused exemption (DSUE) via a timely Form 706.
- Estates above the exemption are taxed at rates up to 40%; the GST tax is a parallel regime.
Practical Example
A widow dies in 2026 with a $20 million estate. Her own $15 million exemption shields most of it, and if her late husband's estate timely elected portability for his unused $15 million, the couple's combined $30 million exemption covers the full estate, leaving no federal estate tax.
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