Ask almost anyone who has accumulated meaningful wealth over a lifetime of work — a paid-off home, a retirement account, a rental property or perhaps a small business — and there’s a good chance they’ll tell you they’re “probably going to pay estate taxes.” This is one of the most persistent concerns in personal finance, dating back to when it was true for a broad swath of American households.
In long recent history, this concern was real. In the 1990s and early 2000s, the federal estate tax exemption was only $600,000 to $1 million per person. In an era when home values were rising and 401(k)s were maturing, a couple who owned a modest home, did fairly well in the stock market and ran a small business could actually find themselves near or above the taxable threshold. Wealth taxes were not just a concern for the ultra-rich; They were a legitimate planning issue for a broad group of middle-class and upper-middle-class families. Considering the estate tax is a 40% flat tax on every dollar above available exemptions, this was a real fear, but the reality of estate planning has changed dramatically since then.
The federal lifetime gift and estate tax exemption is currently $15 million per individual, or $30 million for a married couple. No, these numbers are not typos. They represent the total amount of money that can be transferred during your lifetime or at your death (or some combination of the two) without incurring a single dollar of federal estate or gift tax. The jump from a $1 million discount in the early 2000s to today’s $15 million didn’t happen overnight. It was a series of legislative steps that culminated in a provision that appeared to be temporary and then recently became permanent with the One Big Beautiful bill. There is currently no scheduled expiration, but Congress may change the tax law at any time in the future.
The annual gift tax exclusion, a separate, smaller provision that lets you make a gift each year without any taxes or paperwork, sits at $19,000 per recipient in 2026. Married couples can combine their exclusions to give as many individuals $38,000 per year as they want, without touching the lifetime exemption. Any gift of more than $19,000 in a calendar year to a single recipient requires a 709, even if you owe zero dollars in gift tax. The form is not a bill; This is a record. This tells the IRS, “I have exceeded the annual exclusion this year, and I am reducing my lifetime exemption accordingly.” It is as much a tracking document as a tax return.
Gift-splitting deserves special attention. When a married couple wants to treat a gift as coming from both spouses – even if only one spouse wrote the check – they must elect gift-splitting on Form 709. This may be beneficial as it effectively doubles the annual exclusion to $38,000 per recipient, but the election must be made on the properly filed return. A couple who makes a gift of $35,000 and simply assumes it is “split” between them has not, in the view of the IRS, actually divided it until the form has been filed and an election has been made.
If your instinct has always been, “I should probably worry about estate taxes,” the good news is that for most American families, federal estate taxes are not a current threat. But “property taxes are not owed” and “there is nothing to think about” are not the same thing. Form 709 troubles many people when they give large gifts to children or fund the education of grandchildren. State estate taxes apply at very low thresholds for residents of some states. And the portability election, one of the most valuable protections available to married couples, requires a timely filing, which many families miss simply because no one told them it was required.
The right conversation with an estate planning attorney and your financial advisor is not “Do I owe estate taxes?” This is “What is the value of my assets, how fast are they growing, what laws apply in my state, what gifts I have made, and has every filing been made correctly?” For most people the answer to the first question is reassuring. The second set of questions is where the real planning begins.
Zach Harney is a wealth manager at Creative Planning. He welcomes your questions related to investing, taxes, retirement or estate planning. Send your questions to: Zach Harney, 2340 Garden Road, Suite 202, Monterey, CA, 93940. Or you can email zach.harney@creativeplanning.com. This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market outcome is no assurance of future performance. The information provided herein has been obtained from sources believed to be reliable but is not guaranteed.