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At a rally in Clarksville, Tennessee, on Oct. 10, President Donald Trump told the crowd, “I got rid of the estate tax on farms and small businesses,” according to FOX 17 in Nashville. (1)(8)
The station added a reality check of its own: “The federal estate tax still exists, although the current exemption shields many estates.” (1)
I’ve been a CPA since 1981, and here’s how I’d put it: For almost everyone reading this, the federal estate tax was never a problem in the first place.
The IRS says estates of people who die in 2026 have a basic exclusion amount of $15 million. (2) The Tax Policy Center estimated that only 3,960 estates would owe federal estate tax in 2023, when the exemption was lower. (3)
Meanwhile, the Tax Foundation reports that 12 states and the District of Columbia impose their own estate taxes, and five states levy inheritance taxes. (4)
So while his statement was incorrect, he’s right that federal estate tax almost certainly won’t touch your family. Here are five things you should know.
1. The federal estate tax is still on the books — it just doesn’t apply to most people
The IRS hasn’t stopped collecting estate tax. Its own filing threshold for deaths in 2026 is $15 million. (5)
In the same 2023 analysis, the Tax Policy Center projected that “no small farm or small business” would owe the tax. (3)
So “got rid of the estate tax” is a stretch. In my view, “made it irrelevant for nearly everyone” is closer to the truth — and that was largely true before the latest law, too.
2. Your state may tax what Washington won’t
State estate taxes kick in at much lower amounts. According to the Tax Foundation, Oregon and Rhode Island have the least generous exemptions, at $1 million and $1,838,056, respectively. (4)
Hawaii and Washington have the highest top estate tax rates, at 20%. (4)
A paid-off house plus a couple of retirement accounts can get you to $1 million faster than you’d think. If you live in a state with its own estate or inheritance tax, find out where your line is.
If your estate is anywhere near that line, it’s worth a conversation with a pro. SmartAsset offers a free service that matches you with up to three fiduciary financial advisors, who are required to put your interests first.
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3. The ‘step-up’ is worth more to your kids than any exemption
Here’s the tax break that actually matters for most families. The IRS says the basis of inherited property is generally its fair market value on the date of the owner’s death. (6)
Property you give away while you’re alive is different. If it’s worth at least what you paid, the person who gets it generally takes your adjusted basis. (6)
Let’s say Mom and Dad paid $100,000 for a house that’s now worth $400,000. If the kids inherit it and sell it for $400,000, there’s generally no taxable gain.
If the parents deed it to them first, the kids generally take over the $100,000 basis — and a potential $300,000 gain.
That’s why signing over the house to avoid taxes can backfire: It can create a tax bill that wouldn’t otherwise exist. This is also why talking to a pro is good idea as retirement approaches.
Quick gut-check — if your money advice is coming from random online influencers, you’re playing a dangerous game. I’ve been a CPA since 1981 and writing about money since before the internet existed. Sign up for the free Money Talks Newsletter and get expert advice that’s been tested by time.
4. Inherited retirement accounts come with an income tax bill
Your IRA or 401(k) works differently. According to the IRS, “Beneficiaries must include any taxable distributions they receive in their gross income.” (7)
Most adult children who inherit an account must empty it by the end of the 10th year following the year of the owner’s death. (7) Spouses, minor children and a few others get different rules. (7)
Roth accounts are friendlier: The IRS says withdrawals of contributions from an inherited Roth are tax-free, and most withdrawals of earnings are, too. (7)
In my view, for a lot of middle-class families, this — not the estate tax — is the biggest tax hit in an inheritance.
5. Without a plan, the people you love inherit the paperwork
No estate tax doesn’t mean no hassle. Someone still has to sort out who gets what, and that’s far easier when you’ve spelled it out in writing.
A will locks in exactly who gets what — you can get one in minutes for $199 from services like Trust & Will. A trust goes further, controlling how and when heirs inherit, starting at just $499.
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My honest take
The president’s line plays well at a rally, especially for farm families with big land holdings. A higher exemption is real relief.
But if you’re like most people, the estate tax was never coming for you. Your state, your IRA and your paperwork are.
So don’t plan your estate around a tax you’ll never owe. Plan it around the people who’ll be left holding the paperwork.
Sources: 1. FOX 17; 2. IRS; 3. Tax Policy Center; 4. Tax Foundation; 5. IRS; 6. IRS Publication 551; 7. IRS; 8. KATV
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