This article is for educational purposes only and does not constitute medical, legal, or financial advice. Every family situation is different, and you should consult with appropriate professionals about your specific circumstances.

Estate Taxes — What Most Families Actually Need to Know (Less Than They Fear)

The moment you hear "estate tax," something in your stomach tightens. You picture the government swooping in after your parent dies, seizing half of everything they worked for their whole life. The word "tax" attached to death feels obscene, punitive, like the system is designed to punish families for having saved money. You start imagining complicated schemes and strategies and wondering if you need to hire some expensive lawyer just to survive financially after your parent's death.

Here's the actual situation, and I'm going to be honest with you: the anxiety around estate taxes exceeds the reality for most families. This doesn't mean estate taxes don't matter or that you should ignore them. It means you can approach this as a calm, practical problem rather than a financial crisis you haven't seen coming.

What makes this confusing is that estate tax works differently than income tax. It's governed by federal rules that change, state rules that vary wildly, and exemptions that are so generous that most people never encounter estate tax at all. A competent estate planning attorney can tell you in about five minutes whether this actually affects your family. Until you know that answer, you're worrying about something that might not apply to you.

Let me walk you through the actual mechanics, what it means for your parent, and whether you need to do anything about it right now.

Understanding the Basics

Estate tax is a tax on the total value of everything your parent owns when they die. It's a federal tax first and foremost, though some states have their own estate taxes on top of that. The key number to understand is the exemption amount. In 2024, the federal estate tax exemption is about $13.6 million per person. That means if your parent's estate is worth less than $13.6 million, there's no federal estate tax due. That exemption is scheduled to drop to roughly $7 million per person after 2025, which is when this becomes relevant to more families.

For a married couple, you can potentially double that number through something called portability, which means a surviving spouse can use the unused exemption from the deceased spouse's estate. This is automatic in most cases as long as the right paperwork is filed, though it does require filing an estate tax return.

State-level estate taxes are different. Some states have no estate tax at all. Others have an exemption of $1 million or less, which means significantly more families get caught in them. This is where the variation gets real and where the state you live in suddenly matters quite a bit. A $2 million estate in Connecticut might trigger state estate taxes. The same $2 million estate in many other states faces no state estate tax whatsoever.

Here's the part that matters for your planning: you don't have to worry about any of this until you know two numbers. The first is what your parent's estate is actually worth. The second is whether your parent lives in a state with an estate tax and what that state's exemption is. Those two pieces of information tell you whether estate tax is something you need to plan for or whether it's theoretical for your family.

Your Parent's Specific Situation

Start by getting a realistic sense of what your parent's estate is worth. This includes everything they own: the house, bank accounts, investments, life insurance, retirement accounts, vehicles, valuable personal property. If your parent is married, include your parent and their spouse's combined assets if they're going to leave things to each other or their children.

You need to know what your parent actually wants to happen to their money and property. This is separate from the tax question. Your parent might want everything to go to you, or they might want to split it among multiple children, or set aside money for grandchildren, or give to charity. That intention matters because different distribution strategies affect taxes differently.

Ask your parent whether they've discussed their estate with an attorney. If they have, they may already have an estate plan that addresses taxes. If not, understanding their specific numbers and wishes is the starting point for any conversation with an attorney. Don't speculate about your parent's assets. Ask them directly, or if your parent is declining to discuss it, ask whether there's an estate attorney or financial advisor you should talk to.

Documentation matters here. You need to understand whether your parent has a will, a revocable living trust, a life insurance policy that designates beneficiaries, or retirement accounts that have beneficiary designations. All of those documents affect what gets included in the taxable estate and when. Some assets pass outside of the probate process entirely because beneficiaries are named directly. That distinction affects the tax calculation.

Taking Next Steps

If your parent's estate is worth significantly less than the federal exemption for their year of death, and your state has no estate tax, then estate tax planning might not be your immediate priority. You can focus on other parts of the estate plan like making sure there's a will or living trust, that beneficiaries are named on accounts, and that someone is authorized to manage things if your parent becomes incapacitated.

If your parent's estate is close to or exceeds the exemption, or if you live in a state with a lower exemption, then you need an estate planning attorney. This is not something to do yourself online. Estate tax strategies are specific to your state, your family structure, your parent's intentions, and the current law. An attorney who specializes in estate planning can talk you through options like creating a trust, making strategic gifts, using a spousal lifetime access trust, or other approaches. The cost of an attorney is often far less than the tax you'd owe without proper planning.

You also need to understand the current law and plan for changes. The federal exemption is set to drop significantly in 2026. If your parent's estate is close to the current exemption, it's worth planning now rather than waiting. If your parent's estate is clearly under the exemption even after the change, you can be less urgent about this.

If your parent is married, the surviving spouse's taxes matter too. Some strategies that protect one spouse's assets don't protect the surviving spouse's assets. This is why you need someone who understands your specific family situation, not just generic tax advice.

The timeline for action depends on your parent's health, their age, and the complexity of their estate. If your parent is young and healthy, you have time. If your parent is older or has health concerns, getting an estate plan in place while they have full legal capacity is important. You can't make these decisions after your parent becomes incapacitated.

One practical step you can take right now is organizing your parent's financial information. Collect documents showing what accounts exist, what assets are owned, who the beneficiaries are on life insurance and retirement accounts, and what the approximate values are. This is useful for your own understanding, and it's information any attorney will need. You can organize this in a simple spreadsheet or folder and keep it safe. Your parent should know where it is and consider keeping a copy in a safe place that you and any other relevant people can access.

Estate taxes are real, and they do matter for families with significant wealth. But they're not the monster that people fear. Most families either don't owe them at all or can avoid them through straightforward planning strategies. Understanding your specific situation is the first step. Then you can decide what, if anything, needs to change.

How To Help Your Elders is an educational resource. We do not provide medical, legal, or financial advice. The information in this article is general in nature and may not apply to your specific situation. If you are concerned about a loved one's cognitive health or safety, consult with their healthcare provider or contact your local Area Agency on Aging for guidance and support.