Prepare for Reduced Federal Estate Tax Exemption in 2026
Did you know the federal estate tax exemption is set to drop by nearly half in 2026? If your estate is large enough to face a federal estate tax, without proper planning, your family may face a significant tax liability. Attorneys at the estate planning law firm of Lee Kiefer & Park will discuss federal estate taxes, available tax exemptions, and how you can limit your exposure to the estate tax.
Lee Kiefer & Park’s highly experienced estate planning attorneys in Las Vegas, Greg J. Carlson and Jordanna L. Evans, help clients throughout Nevada with their high-net-worth estate planning needs. Call us at 702-333-1711 to schedule a free consultation to discuss federal estate taxes and how to reduce your exposure to the estate tax..
What is the Federal Estate Tax?
The federal estate tax is a tax imposed on the transfer of assets from a deceased person. It covers the total value of the deceased person’s assets owned at the time of death. Such assets may include real estate, investments, business ownership, and other valuable assets. While Nevada residents will still face the federal estate tax, there is no state-level estate tax in the state of Nevada.
What is the Federal Estate Tax Exemption?
The federal estate tax exemption is the threshold under which no federal estate tax will be imposed. In other words, if the total value of a deceased person’s assets at the time of death is under the federal estate tax exemption, then no estate tax will apply. The federal estate tax exemption is based on the federal Tax Cuts and Jobs Act, which went into effect in 2018.
For 2025, an estate with value in excess of $13.99 million is subject to the estate tax ($27.98 million for married couples). There is no federal estate tax on anything under this amount. The federal estate tax rate varies depending on the value of the estate. The rate schedule starts at 18% (for assets up to $10,000 above the exemption) and increases to 40% (for assets exceeding $1 million beyond the exemption).
Why is the Federal Estate Tax Exemption Dropping in 2026?
The Tax Cuts and Jobs Act expires at the end of this year. While many expect Congress to address this before year end, it has not happened yet. And if Congress does not address this by year end, the exemption will drop to approximately $7 million in 2026.
Who Might Be at Risk for Paying the Federal Estate Tax?
A $13.99 million estate is much more than the average Nevada resident will own at the time of death. However, the federal estate tax casts a wide net. The estate tax calculation starts with calculating the “gross estate.” The IRS states that the gross estate includes everything you own or have particular interests in at your death. The fair market value of such assets is used, not what you paid for the assets when you acquired them. This will include the following:
- Cash
- Securities
- Real estate
- Insurance
- Retirement accounts
- Annuities
- Business interests
- Other assets
If you’ve lived in your house for a long time or have investments you’ve kept for many years, you may be surprised how much their fair market value has increased.
After calculating your gross estate, you may be able to make certain deductions and reductions in value to come up with your “taxable estate.” Your estate must file a federal estate tax return if your gross estate, increased by your adjusted taxable gifts, is higher than the estate tax exemption for the year of your death.
How Can I Prepare for a Lower Federal Estate Tax Exemption?
Whether the exemption declines in 2026 or not, here are steps that may help you prevent your estate from being subject to the federal estate tax:
- Spend your money: As long as you’re not buying something that can be considered part of your estate, spending your money can help you avoid an estate tax. If you have the time and are healthy enough, why not travel?
- Marital transfers: With some limitations, lifetime gifts and bequests in a will or trust are not subject to federal estate taxes if they pass to a surviving spouse (as long as the surviving spouse is a US citizen). This marital transfer defers any imposition of the federal estate tax, but it doesn’t necessarily eliminate the federal estate tax. When your spouse passes away, their estate could owe taxes on the entire estate (including assets you transferred to them).
- Lifetime gifts: You can make yearly, tax-free gifts to others, including your children and grandchildren, up to the federal gift annual exclusion limit to avoid a gift tax. Depending on how often you give and the amount of the gift, it may substantially reduce your gross estate.
You might also use different types of trusts, business interests in family limited partnership, or certain types of annuities to reduce your federal estate tax exposure.
Contact an Estate Planning Lawyer in Las Vegas
The federal estate tax can be a great burden on large estates. Many of us may be closer to having that tax imposed than we realize. Being proactive in reducing the value of your estate through legal and well-executed strategies can prevent estate tax issues, especially if the exemption shrinks in 2026.
Estate planning law firm Lee, Kiefer & Park’s highly experienced Las Vegas estate planning lawyers, Greg J. Carlson and Jordanna L. Evans, can help minimize their Nevada clients’ potential tax exposure through estate tax planning strategies. If you or someone you know needs estate planning in Las Vegas or Henderson, contact our estate planning attorneys for a free consultation using our online contact form. Or call 702-333-1711 to speak to a Las Vegas, Nevada, estate planning attorney.
Attorney Kennedy Lee practices in all aspects of trust and estate law. He views all legal issues from multiple angles (e.g. from litigation to administration point of view) to provide a higher quality of service to our client.
