Will the Government Tax Your Estate When You Die?
Worried about estate tax when you die? For most families it's already zero. The real risk to what you leave behind is probate. Here's how to avoid it.
As the saying goes, two things in life are certain: death and taxes. Yet most families make an appointment with us deeply uncertain about what taxes will do to their estate.
When they're gone, how much of what they built will reach their spouse and children, and how much gets lost, or taxed, along the way? Is this on your mind too? Most people worry about it and never get a straight answer. So let's lay out the facts together.
How much can you inherit without paying federal tax?
If your estate is worth less than $15 million on your own, or up to $30 million as a couple, it owes no federal estate tax. That's the exemption under current law, and as of 2025 it's permanent. For almost every one of our clients, federal estate tax is a non-issue.
Your own state law is the one thing to check. Some states levy their own estate or inheritance tax, and a few start far lower than the federal line, taxing estates from $1 or $2 million up.
Does avoiding estate tax mean avoiding probate?
No. Being under $15 million settles the tax question, but something else is still waiting for your family, and it has nothing to do with what you owe. It's called probate, and it applies whether your estate is large or small.
You've likely heard the word on the news. Here's what it actually means for you.
If you die without a trust, everything in your name alone goes through probate. A court steps in. It checks your paperwork, pays your debts, and hands out what's left. Leave a will, and the court and your executor are meant to follow it. Leave nothing, and state law decides who gets what, by a formula that knows nothing about your family or your wishes.
And probate doesn't pay your family first. It pays your creditors first. Everyone you owed gets their share before your spouse or your children. Meanwhile the estate can sit there six months to two years, running up court costs and legal fees the whole time. In a small or debt-heavy estate, those fees eat into what you had set aside for your family. I've watched families spend more settling an estate than the estate was worth.
How do you avoid probate?
You don't need a fortune to fix this. The surest way is a trust that's actually funded. Anything titled in the trust skips probate and goes straight to the people you named, on your terms, with no court in the middle. There's more you can do, too. You can name a beneficiary on a retirement account, or add a transfer-on-death form to a bank account, and those pass straight to the person you choose. But none of them cover everything the way a funded trust does.
People assume they don't own enough to bother with a trust. But it's not about being rich. If there's anything you want to hand down without your family losing months and money to a courtroom, a trust is there to prevent that.
Do you actually need a trust?
The federal government is almost certainly never going to touch your estate. You'd have to be near that $15 million line. Probate is the opposite. It hits a modest estate as easily as a large one, and it takes just as long either way.
So the question is not whether you're rich enough to need a trust. It's whether your family gets a plan they can use the day they need it, or gets handed probate to untangle while they're grieving.
If you're not sure where your family stands, that's something we're glad to look at with you. It usually takes one conversation to know whether probate is a risk for you, and how easily it can be handled.
This article is for general informational purposes and is not personalized legal, tax, or financial advice. Estate and inheritance tax rules vary by state and change over time. Always work with a qualified estate planning attorney or tax professional for your situation.
