The federal estate tax applies to the transfer of property at death when the total value exceeds the federal exemption amount. For 2024, the exemption is $12.92 million per individual, meaning only estates above this threshold owe federal estate tax. The top estate tax rate is 40% on amounts above the exemption.

Several deductions can reduce the taxable estate. The unlimited marital deduction allows you to leave any amount to a surviving spouse without triggering estate tax. Charitable donations are also fully deductible, and debts, administrative costs, and funeral expenses reduce the gross estate value before calculating tax.

Estate tax planning strategies include irrevocable life insurance trusts (ILITs) to remove life insurance proceeds from your estate, grantor retained annuity trusts (GRATs) for transferring appreciating assets, and annual gifting to reduce the estate over time. The current high exemption is set to be cut roughly in half after 2025 unless Congress acts, making planning especially important now.