The federal estate tax exemption remains historically high. For many families, that may sound like welcome news.
But it can also create a false sense of completion.
When the One Big Beautiful Bill Act, or OBBBA, was signed into law on July 4, 2025, it set the federal estate and gift tax exemption at $15 million per person and $30 million for a married couple, with annual inflation adjustments thereafter. The sunset that estate professionals had been watching since the exemption amounts were increased in 2017 did not arrive. For many families, that was a meaningful change.¹
Still, the federal number is not the only number that matters.
For families in certain states, families who own property in more than one state, or families whose estate documents were written under a different legal environment, the new law may be a reason to pause and take a fresh look.
Summer can be a practical time to do that. Families are often together. The end-of-year rush has not yet started. And sometimes the most useful planning conversation begins with a simple question:
Does what we have in place still reflect what we want to happen after we are gone?
Why the Federal Exemption May Not Tell the Whole Story
The federal estate tax exemption of $15 million per individual means only estates above that threshold owe federal estate tax at death. For married couples, the combined threshold is $30 million. Estimates suggest that fewer than 0.1 percent of estates that filed returns in recent years owed any federal estate tax.²
So, if you read the headlines after the OBBBA was passed and assumed your estate was no longer a concern, you may be partly right.
But that does not mean your estate strategy should go untouched.
There are three situations where a closer look may still be worthwhile, even if your estate is nowhere near the federal threshold.
Scenario One: Your State May Have Its Own Estate or Inheritance Tax
The OBBBA changed the federal exemption. It did not change state law.
Twelve states and the District of Columbia still impose their own estate taxes, and in many cases, their exemptions are lower than the federal level.³˒⁴
Oregon and Massachusetts set their thresholds at $1 million and $2 million, respectively. In Massachusetts, that number is not indexed for inflation, which means it can quietly become more restrictive over time. A family with a paid-off home, retirement accounts, and other assets may cross that line without thinking of themselves as especially wealthy.
New York has its own wrinkle, often referred to as the “estate tax cliff.” Once an estate exceeds 105 percent of New York’s exemption, currently around $7.35 million, the entire estate is taxed—not just the amount above the threshold. A married couple in New York with an estate slightly above that line could owe New York estate taxes even if they owe nothing federally.
Five states impose an inheritance tax, with Maryland being the only state that currently imposes both an estate tax and an inheritance tax. An inheritance tax is paid by the person receiving the assets, not by the estate. Rates and exemptions vary depending on the recipient’s relationship to the deceased and can affect more than just the very wealthy.
Before reviewing the state-by-state picture, it helps to understand the distinction between estate taxes and inheritance taxes. They are often discussed together, but they work differently and may affect different people.
This article is intended to highlight high-level estate tax considerations. Families should speak with an estate planning professional who can address their specific situation.
Estate Tax and Inheritance Tax: The Practical Difference
An estate tax is paid by the estate before assets are distributed to heirs. It is generally calculated based on the total value of what the deceased owned at death, including real estate, retirement and investment accounts, life insurance proceeds if the deceased owned the policy, business interests, and personal property. If the estate applies, the tax is paid before assets pass to beneficiaries. At the federal level, and in most states that impose an estate tax, the estate’s executor or administrator handles this obligation.
An inheritance tax works differently. It is paid by the person receiving the assets, not by the estate. The amount owed depends not only on the value received, but also on the heir’s relationship to the person who died. Close relatives, typically spouses and children, are often exempt or taxed at lower rates. More distant relatives or unrelated heirs may face higher rates with much smaller exemptions.
For example, in Nebraska, an adult child may owe inheritance tax on amounts above $100,000. In Kentucky, nieces and nephews receive only a $1,000 exemption before the tax applies. In those cases, the heir pays the tax from the inheritance, not from the estate.
The distinction matters when preparing an estate strategy.
With an estate tax, the key issue is whether the total value of the estate exceeds the applicable exemption. With an inheritance tax, the issue is who receives the assets and how much each person receives. A family could have an estate below any estate tax threshold and still create an inheritance tax issue if assets pass to non-immediate family members, such as a niece, close friend, domestic partner in certain states, or sibling, depending on the state involved.
Maryland is currently the only state that imposes both. Qualifying estates there may owe state estate tax on the total value of the estate, while individual heirs may separately owe inheritance tax on what they receive.
Spouses are generally exempt from inheritance tax in every state that imposes it, but the rules for other relatives vary enough that knowing your state’s specific treatment can matter.
The table below shows which states currently impose estate or inheritance taxes, along with approximate 2026 exemptions and top rates.
Where Does Your State Stand on Estate and Inheritance Taxes?
Scenario Two: You Own Property in More Than One State
Estate and inheritance taxes often follow property, not just people.
If you own a vacation home, investment property, land, or other real estate in a state other than where you live, your estate may be subject to that state’s rules even if your home state has no death tax of its own.
For example, a Florida resident with a vacation home in Vermont would owe no Florida estate tax because Florida does not impose one. But Vermont’s $5 million exemption and 16 percent flat rate could still apply to the Vermont property.
Similarly, someone who lives in Texas but inherited a rental property in Oregon could face Oregon’s $1 million threshold on that asset.
This is one of the more overlooked parts of estate preparation. Families may assume their estate strategy is complete because their home state does not impose an estate tax, only to discover that real property elsewhere creates a separate planning issue.
If any real or tangible property sits in a different state than where you live, it may be worth confirming how that state’s rules apply to your situation.
Scenario Three: Your Documents May Have Been Written for a Different Law
Even if your state has no estate tax and your estate is well below the federal threshold, your documents may no longer reflect what you actually want—or what the current law now allows.
Many estate strategies were designed around the anticipated expiration of the higher federal exemption. Credit shelter trusts, bypass trusts, and certain irrevocable structures were often built to capture a lower exemption before it disappeared. Now that the exemption has increased rather than decreased, some of those structures may be unnecessary or may create unintended consequences.
One issue worth understanding is that assets held in a bypass trust or credit shelter trust typically do not receive a step-up in cost basis at the surviving spouse’s death.⁵
That means heirs who eventually sell those assets may owe capital gains taxes on years of appreciation that might have been avoided if the assets had passed through the estate. In a world where estate taxes are no longer a concern for most families, holding appreciated assets in a trust that blocks the step-up may create a cost that no longer serves the original planning purpose.
Trust planning involves complex tax rules and legal considerations. If you have a credit shelter trust, bypass trust, or another type of trust, it may be worth having the document reviewed by an estate planning attorney who can help determine whether changes are appropriate.
Beyond trust structures, several other parts of an estate strategy may deserve a fresh review regardless of the tax landscape.
- Beneficiary designations on retirement accounts and life insurance policies typically override what is written in a will or trust. They are also among the most commonly outdated documents in an estate plan. Courts have upheld transfers to former spouses, deceased relatives, and unintended heirs when beneficiary designations were not updated after a life change.
- Powers of attorney and healthcare directives should reflect your current wishes and name people who are still living, still capable, and still the right choice. If these documents have not been reviewed in years, they may name someone who no longer fits the role.
- Executors and trustees named years ago may have moved, declined in health, or changed their relationship with your family. Someone who made sense twenty years ago may not be the right person to manage a complex estate today.
- Asset titling determines what passes through probate and what does not. A trust that holds no assets because titling was never updated may be little more than an expensive document.
There is no deadline attached to this review. The law is not expiring.
The urgency is not tax-driven. It is life-driven.
Estate strategies can go out of date in two ways. Sometimes it happens slowly, as the law changes around them. Other times it happens suddenly, when a family member dies, divorces, remarries, has children, or experiences another major life event.
The result may be a document that was carefully prepared at one point in time but has not kept pace with the family, the assets, or the law since.
A More Coordinated Review May Be Worthwhile
Estate planning conversations can be difficult. They involve mortality, family responsibilities, control, legacy, and sometimes old assumptions that have never been revisited.
But avoiding the conversation does not make the planning stronger.
A review does not always need to begin in a conference room. It may begin more naturally with a simple question around the family table:
When did we last look at this?
From there, a more coordinated review can help clarify what is still working and what may need attention. That review may include estate documents, beneficiary designations, asset titling, trust provisions, and the question of whether certain items should be revisited with an estate attorney.
For many families, that review has never happened in a coordinated way.
As financial professionals, we can help organize the conversation, identify items worth reviewing, and coordinate with the broader professional team. That may include estate attorneys, accountants, business consultants, and other advisors who each see part of the picture.
The goal is not to replace legal advice. The goal is to help make sure the planning reflects the family’s current circumstances, priorities, and long-term intentions.
Frequently Asked Questions
Do I still need an estate strategy if my estate is well below $15 million?
Yes, for reasons unrelated to the federal estate tax. An estate strategy is the legal framework that determines who receives your assets, who manages your affairs if you cannot, and who makes medical decisions on your behalf.
Beneficiary designations, powers of attorney, healthcare directives, asset titling, and trustee or executor appointments all matter independently of your federal estate tax exposure.
If I live in a state with no estate tax, could this still apply to me?
It may.
If you own property in a state that does impose an estate or inheritance tax, such as a vacation home, investment real estate, or land, that state’s rules may apply to those assets regardless of where you live.
A strategy written five or ten years ago may also have been built around assumptions about your family, your assets, and the law that may have changed.
Does an older trust need to be reviewed after the new tax law?
Many trusts created before 2025 were built around certain expectations about the federal estate tax exemption. It may be worth having an estate planning attorney review the specific language to determine whether the structure still supports the family’s goals.⁵
What role does a financial professional play in an estate strategy review?
A financial professional typically plays a coordinating role rather than drafting legal documents, which remains the role of an estate planning attorney.
In a review, a financial professional may help gather and organize the existing strategy, check that retirement accounts and other documents carry the intended beneficiary designations, confirm that assets are titled consistently with the plan, identify items that may have been overtaken by life events or legal changes, and help flag issues that warrant a conversation with an attorney.
In many cases, the financial professional serves as a quarterback, helping the family’s broader advisory team follow the same playbook.
1 Forbes, July 3, 2025
2 Center on Budget and Policy Priorities, December 19, 2025
3 Tax Foundation, October 28, 2025
4 AARP, March 31, 2026
5 Commerce Trust, August 30, 2024
Disclosure: This blog is for informational and educational purposes only and does not constitute legal or tax advice. Estate planning rules vary significantly by state and individual circumstance. Consult a qualified estate planning attorney and financial advisor before making decisions based on this content. State exemption amounts and rates are subject to change.