Passing on wealth in the United States, 2026: estate tax, probate, the ten-year rule, and the part the law can't carry

• Federal estate and gift tax exemption: US$15 million per person from 2026, indexed; 40% above. A married couple can shelter US$30 million with portability.

• Annual gift exclusion: US$19,000 per recipient in 2025 and 2026; gifts above it use lifetime exemption and are reported on Form 709, rarely taxed.

• Inherited retirement accounts must generally be emptied within ten years by non-spouse heirs under the SECURE Act, with annual minimum withdrawals during those years where the owner had already started them; spouses can roll over.

Yes, federally, on estates above the exemption, and in twelve states plus the District of Columbia on their own thresholds: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington. Oregon's starts at US$1 million, Massachusetts' at US$2 million, New York's at about US$7.2 million with a cliff that taxes the whole estate once it exceeds the threshold by five percent. Five states charge an inheritance tax on the recipient instead, at rates that depend on the relationship: Kentucky, Maryland (which has both), Nebraska, New Jersey and Pennsylvania; Iowa's ended in 2025. Most Americans pay neither; the ones who do pay a great deal, which is why structure matters above the threshold. Portability lets a surviving spouse use the deceased spouse's unused exemption if an estate tax return is filed within five years. Assets left to a US-citizen spouse pass tax-free under the unlimited marital deduction; a non-citizen spouse needs a qualified domestic trust to get the same deferral.

Gifts during life above the annual exclusion count against the lifetime exemption. Assets held until death take a step-up in basis under section 1014: the heir's cost becomes the value at death and the lifetime gain is never taxed. That single rule shapes American planning: give the assets that have not appreciated, hold the ones that have, and never gift the low-basis stock that a step-up would have cleaned. Direct payments of tuition and medical bills are exempt from gift tax without limit, which is how grandparents fund college without touching the exemption.

Probate is the state court process that validates the will and supervises the executor. It is public, slow (nine to eighteen months is normal), and in some states expensive: California sets statutory fees for the attorney and the executor as a percentage of the gross estate, four percent of the first US$100,000 and sliding down, which on a US$2 million house is about US$33,000 each. The revocable living trust exists to bypass it: assets moved into the trust during life pass under its terms without court involvement. Transfer-on-death deeds for real estate, payable-on-death accounts and joint ownership do the same job for single assets. Nine community-property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) change what the estate contains before any of this starts, because the surviving spouse already owns half, and both halves of community property take a step-up at the first death.

IRAs and 401(k)s pass by beneficiary designation, outside the will. Since the SECURE Act of 2019 most non-spouse heirs must empty an inherited account within ten years, and the 2024 final regulations require annual minimum withdrawals in years one to nine where the owner had reached their required beginning date. Every dollar from a traditional account is taxed as the heir's income, often in their peak earning years. Spouses can roll over into their own account; minor children of the owner, the disabled and chronically ill, and heirs within ten years of the owner's age keep the old life-expectancy stretch. Roth conversions during the owner's life, so that the ten-year withdrawals are tax-free, are the common answer; naming a charity for the traditional account and the children for everything else is another.

A durable power of attorney and a health care proxy or advance directive, by state; most states require notarisation and some require witnesses. All but a handful of states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act, which lets executors reach digital accounts if the will or the platform's own legacy tool allows it, with the content of communications needing express consent. The full plan is the six documents in Estate planning in seven countries.

Spousal lifetime access trusts, which use one spouse's exemption while keeping the other's access; grantor retained annuity trusts; instalment sales to intentionally defective grantor trusts; irrevocable life insurance trusts to pay the tax; dynasty trusts in South Dakota, Delaware, Nevada or Alaska; and the choice of domicile among states with and without their own tax. The twelve months before a sale are covered in High-net-worth estate planning.

A US citizen is inside the estate tax wherever they live, on everything they own anywhere, which is the trap the Israel page is built around. A non-resident who is not a citizen gets an exemption of only US$60,000 on US-situated assets (real estate, shares in US companies, tangible property here), which catches the foreign investor with a Manhattan apartment; the fifteen estate tax treaties (with Australia, Canada by protocol, France, Germany, the United Kingdom and others) soften it for residents of those countries.

The beneficiary designation nobody updated. It overrides the will, and it is where the first spouse, the estate instead of a person, or a child who has since died turns up as the beneficiary of the largest account. A 401(k) designation is governed by federal law and can beat a state divorce decree.

An estate planning attorney licensed in your state, a CPA for the tax return and basis records, and, above the threshold, a private-client team. Bring the asset record and every nomination.