{"id":287023,"date":"2016-04-04T11:02:20","date_gmt":"2016-04-04T16:02:20","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/estate\/planning-an-estate\/federal-estate-and-gift-tax-laws.html"},"modified":"2025-09-03T11:23:00","modified_gmt":"2025-09-03T16:23:00","slug":"federal-estate-and-gift-tax-laws","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/estate\/planning-an-estate\/federal-estate-and-gift-tax-laws.html","title":{"rendered":"Federal &#8216;Death Taxes&#8217; FAQ"},"content":{"rendered":"\n<div class=\"wp-container-core-columns-is-layout-8f761849 fl-sectionWithSidebar fl-container fl-flex fl-flex-wrap fl-gap30\">\n<div class=\"fl-page-articles fl-section-main fl-section-main-full-width\"><h1 class=\"fl-no-margin-top\">Federal &#039;Death Taxes&#039; FAQ<\/h1>\n\n<section class=\"fl-gutenberg-byline\">\n    <div class=\"fl-gutenberg-byline-content\">\n                    By <a href=\"https:\/\/www.findlaw.com\/company\/our-team\/oni-harton-j-d\/\">Oni Harton, J.D.<\/a> | Legally reviewed by <a\n                href=\"https:\/\/www.findlaw.com\/company\/our-team\/aisha-success-esq\/\">Aisha Success, Esq.<\/a>\n                | Last updated\n        <time>\n                            September 03, 2025\n                    <\/time>\n    <\/div>\n\n    \n    <details class=\"fl-gutenberg-byline-toggle fl-gutenberg-byline-legally-reviewed\">\n        <summary>\n            <i class=\"fl-gutenberg-byline-icon\" aria-hidden=\"true\"><\/i>\n            Legally Reviewed\n        <\/summary>\n\n        <div class=\"fl-gutenberg-byline-toggle-content\">\n            <p><em>This article has been written and reviewed for legal accuracy, clarity, and style by <a href=\"https:\/\/www.findlaw.com\/company\/our-team.html\">FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with <a href=\"https:\/\/www.findlaw.com\/company\/company-history\/editorial-policy.html\">our editorial standards<\/a>.<\/em><\/p>\n\n        <\/div>\n    <\/details>\n\n    <details class=\"fl-gutenberg-byline-toggle fl-gutenberg-byline-fast-checked\">\n        <summary>\n            <i class=\"fl-gutenberg-byline-icon\" aria-hidden=\"true\"><\/i>\n            Fact-Checked\n        <\/summary>\n\n        <div class=\"fl-gutenberg-byline-toggle-content\">\n            <p><em>The last updated date refers to the last time this article was reviewed by FindLaw or one of our <a href=\"https:\/\/www.findlaw.com\/company\/our-team\/contributing-authors.html\">contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please <a href=\"https:\/\/lawyers.findlaw.com\/?fli=bylinelink\" target=\"_blank\" rel=\"noopener\">contact an attorney in your area<\/a>.<\/em><\/p>\n\n        <\/div>\n    <\/details>\n<\/section>\n\n\n<div class=\"fl-key-takeaways fl-mb30\" data-testid=\"fl-key-takeaways\">\n    <div class=\"fl-card-content\">\n        <div class=\"fl-card-body fl-card-bg-teal fl-flex fl-flex-column\">\n                            <h2 class=\"fl-card-title fl-h2 fl-no-margin\">Key Takeaways<\/h2>\n                        <p>There are many questions about what are commonly referred to as &#8220;death taxes&#8221; the federal government can impose upon the estate of a decedent. Large estates pay a federal estate tax on the owner&#8217;s death. The federal government also imposes a gift tax and a generation-skipping transfer tax.<\/p>\n\n        <\/div>\n    <\/div>\n<\/div>\n\n\n<p>This article discusses all three federal taxes. It will answer the following questions:<\/p>\n<ul>\n<li>Do you have to pay taxes on an inheritance?<\/li>\n<li>Will my estate owe federal taxes when I die?<\/li>\n<li>Can a trust reduce my estate tax?<\/li>\n<li>Can I still control trust funds used for tax purposes?<\/li>\n<li>How can an estate planning attorney help?<\/li>\n<\/ul>\n<h2>Do You Have To Pay Taxes on an Inheritance?<\/h2>\n<p>The federal government\u00a0<a href=\"https:\/\/www.findlaw.com\/estate\/planning-an-estate\/how-us-tax-rules-apply-to-inheritances-and-gifts-from-abroad-.html\">does not impose an inheritance tax<\/a>\u00a0on an inheritance from a loved one \u2014 or anyone else. This means you do not owe income tax or any inheritance tax on the gifted assets. (You may be responsible for those assets&#8217; income).<\/p>\n<p>While the\u00a0<a href=\"https:\/\/www.findlaw.com\/estate\/planning-an-estate\/state-laws-estate-taxes.html\">federal government doesn&#8217;t have an inheritance tax<\/a>, it does have an estate tax. The IRS imposes a federal estate tax on the deceased&#8217;s assets. If the probate estate at the date of death includes the following, they could be taxable:<\/p>\n<ul>\n<li>Real estate<\/li>\n<li>Cash<\/li>\n<li>Insurance<\/li>\n<li>Securities<\/li>\n<li>Business interests<\/li>\n<li>Other assets<\/li>\n<\/ul>\n<p>Estates that exceed the federal estate tax exemption do not need to file any\u00a0<a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/forms-and-publications-estate-and-gift-tax\" target=\"_blank\" rel=\"noopener\">estate and gift tax IRS form<\/a>. Unlike a state inheritance tax levied against the inheritors, an estate tax is levied against the decedent&#8217;s taxable estate. Also, several states impose an estate tax.<\/p>\n<h2>Will My Estate Owe Federal Taxes When I Die?<\/h2>\n<p>Through the\u00a0<a href=\"https:\/\/www.irs.gov\/\" target=\"_blank\" rel=\"noopener\">Internal Revenue Service<\/a>\u00a0(IRS), the federal government imposes a federal\u00a0<a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/estate-tax\" target=\"_blank\" rel=\"noopener\">estate tax<\/a>,\u00a0<a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/gift-tax\" target=\"_blank\" rel=\"noopener\">gift tax<\/a>, and\u00a0<a href=\"https:\/\/www.irs.gov\/forms-pubs\/about-form-706-gs-t\" target=\"_blank\" rel=\"noopener\">generation-skipping transfer tax<\/a>. The governing tax law is in the\u00a0<a href=\"https:\/\/codes.findlaw.com\/us\/title-26-internal-revenue-code\/\" target=\"_blank\" rel=\"noopener\">Internal Revenue Code, Subtitle B, Chapters 11-13<\/a>. For those with large estates, tax planning is a must. This section discusses each tax in turn.<\/p>\n<h3>Chapter 11, Estate Tax<\/h3>\n<p>When someone dies, their estate might have to pay a\u00a0<a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/estate-tax\" target=\"_blank\" rel=\"noopener\">federal estate tax<\/a>. The federal estate tax exemption is now set at over $12 million. Most people need not worry about filing a federal estate tax return.<\/p>\n<p>That said, if the value of your estate exceeds the exemption, it may face a\u00a0tax rate up to 40%. Notably, the unlimited marital deduction allows you to avoid the tax by leaving your entire estate to your spouse when you die. Your spouse must be a U.S. citizen to qualify for the unlimited marital deduction.<\/p>\n<h3>Chapter 12, Gift Tax<\/h3>\n<p>According to the IRS,\u00a0<a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/frequently-asked-questions-on-gift-taxes\" target=\"_blank\" rel=\"noopener\">a gift<\/a>\u00a0is \u201c[a]ny transfer to an individual, either directly or indirectly, where full consideration (measured in money or money&#8217;s worth) is not received in return.&#8221; But, the federal gift tax comes with many exemptions. For example, under federal gift tax laws, the following are not taxable gifts:<\/p>\n<ul>\n<li>Medical expenses<\/li>\n<li>Tuition<\/li>\n<li>Gifts to your spouse<\/li>\n<\/ul>\n<p>Gifts in these categories will never trigger the need to file a gift tax return. Further, the\u00a0<a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/frequently-asked-questions-on-gift-taxes\" target=\"_blank\" rel=\"noopener\">annual gift tax exclusion<\/a>\u00a0also allows you to make gifts under a certain &#8220;<a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/frequently-asked-questions-on-gift-taxes\" target=\"_blank\" rel=\"noopener\">fair market value<\/a>&#8221; to as many people as you want each calendar year.<\/p>\n<p>In 2025, the annual exclusion amount is $19,000. Finally, the current &#8220;<a href=\"https:\/\/www.irs.gov\/newsroom\/estate-and-gift-tax-faqs\" target=\"_blank\" rel=\"noopener\">basic exclusion amount<\/a>&#8221; (BEA) temporarily allows you to give over $13.99 million in tax-free lifetime gifts. The lifetime gift tax exemption amount in 2025 is $13.99 million.<\/p>\n<h3>Chapter 13, Tax on Generation-Skipping Transfers<\/h3>\n<p>Also known as the\u00a0<a href=\"https:\/\/corporate.findlaw.com\/law-library\/generation-skipping-transfer-tax.html\" target=\"_blank\" rel=\"noopener\">GSTT<\/a>, this tax applies to gifts or inheritances left to someone at least 37.5 years younger than the original owner. Before this tax began in 1976, older generations could avoid taxes by \u201cskipping&#8221; a generation.<\/p>\n<h2>Can a Trust Reduce My Estate Tax?<\/h2>\n<p>Your professional service providers, including estate planning attorneys, accountants, and financial advisors, can suggest tax planning strategies to reduce your estate tax.<\/p>\n<p><a href=\"https:\/\/www.findlaw.com\/estate\/trusts.html\">Trusts<\/a>\u00a0are a common way of\u00a0<a href=\"https:\/\/www.findlaw.com\/estate\/planning-an-estate\/10-ways-to-reduce-estate-taxes.html\">reducing or eliminating both estate and gift taxes<\/a>. A trust is a property arrangement in which a\u00a0<i>grantor\u00a0<\/i>transfers assets managed by a\u00a0<i>trustee\u00a0<\/i>to benefit a\u00a0<i>beneficiary<\/i>.<\/p>\n<p>Though there are\u00a0<a href=\"https:\/\/www.findlaw.com\/estate\/trusts\/types-of-trusts.html\">many kinds of trusts<\/a>, they all transfer ownership of the assets from the grantor to the trust. The grantor and the beneficiary do not own the assets. Thus, they can avoid or reduce estate taxes. These trusts include the following.<\/p>\n<h3>1. A-B Trust<\/h3>\n<p>Also known as a &#8220;bypass&#8221; trust, an\u00a0<a href=\"https:\/\/www.findlaw.com\/estate\/trusts\/ab-trusts-the-tax-saver.html\">A-B trust<\/a>\u00a0involves two trusts (the &#8220;A&#8221; and &#8220;B&#8221;). Upon the death of a spouse, an amount up to that tax year&#8217;s estate tax exemption funds the &#8220;decedent&#8217;s trust&#8221; (B). The remainder of the married couple&#8217;s assets funds the &#8220;survivor&#8217;s trust&#8221; (A).<\/p>\n<p>The unlimited marital tax exemption ensures that the A-trust assets are only taxed when the survivor dies. The survivor receives income from the B-trust as a beneficiary during their lifetime. The next beneficiaries in line (normally the couple&#8217;s children) reap the fruits.<\/p>\n<h3>2. Qualified Terminable Interest Property (QTIP) Trust<\/h3>\n<p>A QTIP trust also allows a deceased person to ensure their surviving spouse gets trust income as a beneficiary. At the same time, the decedent controls who gets the assets when the survivor dies.<\/p>\n<p>For example, they can name children from a previous<i>\u00a0<\/i>marriage as residual beneficiaries. Again, the unlimited marital exemption ensures that assets are only taxed upon the surviving spouse&#8217;s death.<\/p>\n<h3>3. Charitable Remainder Trust (CRT)<\/h3>\n<p>By giving significant assets (e.g., a highly appreciated real estate investment) to a\u00a0<a href=\"https:\/\/www.findlaw.com\/estate\/trusts\/charitable-trust.html\">tax-exempt charity<\/a>, you remove the asset from your estate and avoid the estate tax. If the charity sells the asset and reinvests the proceeds, the charity can avoid capital gains.<\/p>\n<p>You relinquish control of the asset. But you can receive lifetime income from trust investments by naming yourself a lifetime beneficiary. The &#8220;remainder&#8221; when you die goes to the charity.<\/p>\n<h3>4. Life Insurance Trust<\/h3>\n<p>A life insurance trust\u00a0<a href=\"https:\/\/www.findlaw.com\/estate\/planning-an-estate\/transfer-your-life-insurance-policy-to-lower-your-estate-tax.html\">transfers your life insurance policy from your taxable estate<\/a>\u00a0into the trust. The life insurance proceeds When making an\u00a0<a href=\"https:\/\/www.findlaw.com\/estate.html\">estate plan<\/a>, many people wonder whether their estate must pay &#8220;death taxes.&#8221; Federal tax law demands large estates to pay a federal\u00a0<a href=\"https:\/\/www.findlaw.com\/estate\/planning-an-estate\/estate-tax-laws.html\">estate tax<\/a>\u00a0on the owner&#8217;s death. The federal government also imposes a gift tax and a generation-skipping transfer tax. This article discusses all three federal taxes. It will answer the following questions:<\/p>\n<h2>Can I Still Control Trust Funds Used for Tax Purposes?<\/h2>\n<p>Trusts used for tax purposes must generally be &#8220;<a href=\"https:\/\/www.findlaw.com\/estate\/trusts\/irrevocable-living-trust.html\">irrevocable<\/a>.&#8221; The grantor cannot change the trust&#8217;s terms once they go into effect. Hence the name &#8220;irrevocable.&#8221; This ensures that the assets are truly removed from the grantor&#8217;s estate because the grantor fully relinquishes control.<\/p>\n<p>Because the grantor cannot change the terms of the trust, grantors should create an irrevocable trust cautiously. A tax professional and\u00a0<a href=\"https:\/\/lawyers.findlaw.com\/estate-planning\/?fli=dcta\" target=\"_blank\" rel=\"noopener\">estate planning attorney<\/a>\u00a0can help you understand the pros and cons of using a trust for tax purposes.<\/p>\n<h2>How Can an Estate Planning Attorney Help?<\/h2>\n<p>Most people do not need to worry about death taxes. If you do, you likely already have a team of professionals advising you on wealth management and preservation. But, if you need to discuss how to\u00a0<a href=\"https:\/\/www.findlaw.com\/estate\/planning-an-estate\/10-ways-to-reduce-estate-taxes.html\">reduce estate tax liability<\/a>, an estate planning attorney can help. They can discuss ways to maximize advantages and ensure you follow\u00a0<a href=\"https:\/\/www.findlaw.com\/hirealawyer\/choosing-the-right-lawyer\/taxation-law.html\">governing tax laws<\/a>. Contact a local\u00a0<a href=\"https:\/\/lawyers.findlaw.com\/estate-planning\/?fli=dcta\" target=\"_blank\" rel=\"noopener\">estate planning attorney<\/a>\u00a0to learn more.<\/p>\n\n\n<div class=\"was-this-helpful\">\n    <div\n            class=\"was-this-helpful__question-container\"\n            aria-labelledby=\"was-this-helpful__question\"\n            role=\"group\"\n    >\n        <span\n                id=\"was-this-helpful__question\"\n                class=\"was-this-helpful__question fl-text-lg-bold\"\n        >Was this helpful?<\/span>\n        <button\n                class=\"was-this-helpful__button fl-text-sm\"\n                aria-label=\"Yes\"\n                value=\"yes\"\n        >\n            <span class=\"was-this-helpful__button-text fl-text-bold\">Yes<\/span>\n            <i class=\"was-this-helpful__button-icon\">\n                <svg width=\"22\" height=\"22\" viewBox=\"0 0 22 22\" fill=\"none\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\">\n                  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