Understanding the U.S. estate tax 2025 rules is essential for anyone looking to protect their assets and plan effectively. With federal exemptions, top tax rates, and varying state-level thresholds, the system can quickly become complex—and mistakes can be costly for your heirs. This guide walks you through the latest federal estate tax rates for 2025, highlights important state thresholds, and shares practical strategies for minimizing exposure and preserving wealth. Whether you are planning lifetime gifts, preparing for portability elections, or coordinating cross-border considerations, this pillar guide provides the clarity and insights you need to make informed decisions.
TL;DR – U.S. Estate Tax 2025
- Federal Estate Tax: The basic exclusion is $13.99 million per person, with a top rate of 40%. Annual gift exclusion is $19,000 per donee.
- Portability: Survivors can preserve a spouse’s unused exclusion (DSUE). Late elections may be made within 5 years under Rev. Proc. 2022-32 in many cases.
- Sunset of TCJA Exemption: The larger exemption is scheduled to revert after 2025; gifts made while the higher amount applies are not clawed back.
- State Taxes: About a dozen states plus D.C. impose estate taxes, often with thresholds far below federal levels (e.g., MA $2M, OR $1M, WA $3M for deaths 7/1/2025–12/31/2025). Iowa’s inheritance tax is eliminated in 2025.
- Cross-Border Considerations (Canada): Non-U.S. decedents with U.S.-situs assets over $60,000 generally must file Form 706-NA. The U.S.–Canada treaty (Article XXIX-B) may allow prorated unified and marital credits.
Federal Estate & Gift Tax in 2025 (What’s New)
2025 Basic Exclusion & Top Rate
The federal estate and gift tax exclusion for 2025 is $13,990,000 per individual (up from $13.61M in 2024); married couples can combine for $27.98M.
The top federal estate and gift tax rate remains 40%.
Estates below the exemption face no federal estate tax, but planning is essential due to possible future changes. For more guidance, see our federal estate tax planning resources.
Annual Gift Exclusion & Form 709
The annual gift tax exclusion for 2025 is $19,000 per recipient (up from $18,000 in 2024); a married couple can jointly gift $38,000 to each recipient tax-free annually.
Form 709 must be filed if an individual gives more than $19,000 to any person in 2025, splits gifts with a spouse, or makes gifts to trusts, non-citizen spouses (over $190,000 limit), or certain charities.
Gifts exceeding annual exclusions reduce the lifetime exemption; gifts to non-citizen spouses have a separate exclusion cap ($190,000 for 2025). For detailed planning, review our lifetime gift strategies.
GST Overview: Tracking Allocations
The GST (Generation-Skipping Transfer) tax applies to gifts or bequests to skip-persons (e.g., grandchildren).
The GST exemption matches the estate/gift tax exemption ($13.99M for 2025).
GST allocations should be tracked alongside taxable gifts; IRS inflation updates are published annually.
Portability & DSUE (Deceased Spousal Unused Exclusion)
Portability lets a surviving spouse claim any unused exclusion (DSUE) from a deceased spouse, potentially doubling the tax-free transfer at the second death.
Filing Form 706 is necessary—even for non-taxable estates—within 9 months of death (plus a 6-month extension if needed) to elect portability.
Most married families should ensure timely Form 706 filing so the DSUE is preserved for the survivor. Learn more about DSUE and portability elections.
Late-Portability Relief: Rev. Proc. 2022-32
Allows a simplified late portability election for up to 5 years after death (if Form 706 wasn’t required, but not filed on time).
All eligibility rules and procedural requirements in Rev. Proc. 2022-32 must be met; after 5 years, a private letter ruling is needed for relief.
Titling Pitfalls: Bypass vs. Portability
Bypass/credit shelter trusts retain the deceased’s exemption for future appreciation but lose flexibility of portability; direct bequest to spouse uses portability but all assets included in survivor’s estate.
Titling and trust design must consider DSUE preservation vs. long-term estate minimization; check latest Form 706 instructions for portability reporting.
2026 Sunset & Anti-Clawback Regulations
The “sunset” (originally set for Dec. 31, 2025) would have reverted the basic exclusion to about $7M, but the One Big Beautiful Bill Act (OBBBA, July 2025) instead sets it at $15M per individual ($30M for couples) from 2026, with future inflation indexing.
Anti-clawback regulations ensure gifts made with the higher lifetime exclusion (2018–2025) are not subject to additional estate tax after the exemption reduces in 2026—these lifetime gifts are grandfathered at the higher exemption amount when calculating estate tax. For cross-border implications, see our U.S.–Canada estate tax treaty guide.
State Estate vs. Inheritance Taxes (Know Your Exposure)
Estate Tax States & Threshold Examples
Several states still impose state estate tax rules with exemptions much lower than the federal level.
Key 2025 thresholds:
- Massachusetts: $2,000,000 exemption, top rate 16%
- Oregon: $1,000,000 exemption, rates up to 16% for estates above $9 million
- Washington: $3,000,000 exemption (for deaths 7/1/2025–12/31/2025), top rates reach 20% for larger estates
Other states with estate taxes in 2025 include Maine ($7 million), Maryland ($5 million), Minnesota ($3 million), New York ($6.94 million), Vermont ($5 million), Connecticut ($13.99 million), Illinois ($4 million), and Hawaii ($5.49 million).
Inheritance Tax States (Iowa Repeal)
Inheritance taxes are imposed on beneficiaries rather than estates and are now rare.
As of 2025, only six states have inheritance tax states: Nebraska, Kentucky, New Jersey, Pennsylvania, Maryland, and Delaware.
Iowa’s inheritance tax is fully repealed effective January 1, 2025, so no Iowa inheritance tax applies for deaths after this date. Learn more about the Iowa inheritance tax repeal.
The specific rate and who pays the tax differ by state and by the relationship of the beneficiary to the decedent.
Planning Around State Lines (Domicile, Situs, Titling)
State estate and inheritance tax exposure depends on both domicile and situs (location) of assets.
Changing domicile to a state without estate or inheritance tax can reduce or eliminate exposure, but must involve real, documented lifestyle changes (residence, registrations, etc.).
Situs rules can subject real estate and tangible assets (e.g., property, business interests) to tax in the state where located, regardless of the decedent’s domicile.
Proper estate planning strategies across states, including trust titling and asset location, are essential to minimize state-level estate and inheritance tax risk.
These notes distill the state-specific risks and planning issues for estates and heirs in 2025.
Special Cases
Non-U.S. Citizen Spouses → QDOT to Secure Marital Deduction
The unlimited marital deduction from estate tax typically applies only for transfers to a surviving U.S. citizen spouse.
For a non-citizen spouse, a Qualified Domestic Trust (QDOT) is required for assets to qualify for the marital deduction.
A QDOT must:
- Have at least one U.S. citizen or U.S. corporation trustee (e.g., a U.S. bank).
- Give the U.S. trustee power to withhold estate tax on distributions.
- Name the non-citizen spouse as sole income beneficiary during their lifetime.
- Make the QDOT election on a timely filed federal estate tax return (Form 706).
Why the Unlimited Marital Deduction Doesn’t Apply Without a QDOT
Congress denied the unlimited marital deduction to non-citizen spouses due to IRS concerns the assets could leave the U.S., making future tax collection harder.
Without a QDOT, transfers above the exemption to a non-citizen spouse are subject to immediate estate tax, at up to 40%.
If the surviving spouse later becomes a U.S. citizen before the estate is settled, the trust may not be necessary.
Timing: Funding/Election Before Estate Tax Return Deadline
Assets must be transferred to the QDOT, and the QDOT election made, before the estate tax return is due (9 months after death, plus possible extension).
These requirements are set out in IRS rulings and regulations under §2056(d) and §2056A.
Canadians with U.S.-Situs Assets (Cross-Border Estate)
Form 706-NA Filing Threshold $60,000; Transfer Certificates
Nonresident aliens (e.g., Canadians) with over $60,000 in U.S.-situs assets must file Form 706-NA upon death.
A U.S. transfer certificate is required to release U.S. assets from custody after death; Form 706-NA and supporting documents are needed even if there’s no estate tax due.
Treaty Relief: Prorated Unified Credit & Marital Credit; Disclosure
The Canada-U.S. tax treaty (Article XXIX-B) allows Canadians with U.S.-situs assets to claim a prorated unified credit, based on the proportion of U.S. assets to worldwide assets.
A further prorated “marital credit” is available for property passing to a spouse who is a U.S. or Canadian resident, potentially doubling the credit.
Disclosure of worldwide assets is required, and proper forms must be completed for treaty relief.
These compliance and planning notes follow the latest 2025 IRS rules and cross-border treaty guidance for Canadian and non-citizen estate tax exposures.
What to Prepare Before You Call Your Advisor
Net Worth & Asset Map (By State and by Country)
List all major assets by type (real estate, investment accounts, businesses, retirement funds, personal property) and specify where each is located, state by state and country by country.
Include both U.S. and non-U.S. situs assets to support federal and state estate exposure analysis, and cross-border filings or treaty claims.
For each asset, record estimates of value, ownership (sole/joint/community), and any related liabilities (e.g., mortgages, pledges). Consider reviewing our cross-border estate planning guide for organizing international assets.
Prior Form 709 Filings & Lifetime GST Allocations
Gather copies of all prior IRS Form 709 gift tax returns to track lifetime gifts, cumulative exemption used, and annual exclusion utilization.
If GST (generation-skipping transfer) allocations have been made, locate detailed statements from past Form 709 filings and trust accountings to clarify available GST exemption, trust GST status, and allocation dates. See our lifetime gift strategies for reference on managing exemptions and GST allocations.
Titling, Beneficiary Designations, and Buy-Sell Agreements
Review current titling for all major accounts, properties, and business interests (joint tenants, tenants-in-common, trust, corporate, partnership).
Update and confirm named beneficiaries for life insurance, registered retirement/investment accounts, and assets that transfer outside the probate estate; make sure these designations align with the overall estate plan.
Collect copies of all relevant buy-sell, partnership, or shareholder agreements that may affect asset distribution, business succession, or liquidity at death.
Bringing complete, up-to-date records on these items will streamline advisor consultations, prevent tax/reporting errors, and ensure planning solutions are both practical and compliant.
Conclusion
Navigating U.S. estate tax 2025 can be complex, especially when considering federal rates, state-level taxes, non-citizen spouses, and cross-border assets. Careful planning—through lifetime gifts, trusts, proper titling, and beneficiary designations—can help preserve wealth, minimize tax exposure, and ensure your estate plan aligns with your long-term goals. Staying organized and understanding the latest IRS rules and treaty provisions is essential for making informed decisions and protecting your heirs.
Take Action: Consult Your Advisor
To ensure your estate plan reflects the 2025 rules and leverages all available strategies, gather your asset map, prior Form 709 filings, titling and beneficiary documents, and any buy-sell agreements before meeting with a qualified advisor.
TMP’s team of experienced professionals can guide you through federal and state estate planning, cross-border asset management, and lifetime gift strategies, helping you make the most of the current exemptions and safeguard your legacy.
Schedule a consultation today to review your plan, evaluate special cases like non-citizen spouses or Canadians with U.S.-situs assets, and ensure your estate strategy is fully compliant and efficient.