Taxable Estate Planning

Only if your taxable estate exceeds $15,000,000 for a death in 2026, or $30,000,000 for a married couple where the first spouse’s unused exclusion was preserved by a filed return. Above that, the rate is 40 percent under IRC § 2001(c).

Count everything, because the gross estate is broader than people expect: real estate, investments, retirement accounts, business interests, and the full death benefit of any life insurance policy you owned or controlled. That last one moves many families closer to the line than they realized — a $3 million policy is $3 million of taxable estate if you held incidents of ownership.

Missouri adds nothing. Its estate tax is a pick-up tax tied to a federal credit that has been zero since 2005 under RSMo § 145.011, and the Department of Revenue confirms no Missouri return is required. There is no Missouri inheritance tax.

Less urgently, and in some cases not at all — which is a legitimate answer this page is happy to give. The 2025 deadline that drove a decade of planning is gone, and a great many families who were told to act quickly can now simply hold appreciated assets and take the § 1014 basis step-up at death.

Where it still matters: you are genuinely above the line today; you own something growing fast enough to cross it; your wealth is illiquid and the tax would force a sale; or you want to move future appreciation out of the estate while values and interest rates make the arithmetic favorable.

“Permanent” also means only that no sunset is scheduled. Congress can change it, and has, repeatedly. That is a reason for flexible structures rather than for panic.

Portability lets a surviving spouse add the deceased spouse’s unused exclusion — the DSUE amount — to their own. It is what turns $15 million into $30 million for a married couple.

It is not automatic. Under IRC § 2010(c)(5)(A) the deceased spouse’s executor must file a federal estate tax return computing the DSUE and making the election — even where the estate is far below the threshold and no return is otherwise required, and even where there is no tax to pay. Families skip it constantly because a lawyer told them no return was needed.

The fix exists. Rev. Proc. 2022-32 permits a simplified late election for qualifying estates up to the fifth anniversary of death — no private letter ruling, no user fee, just a properly marked return. If your spouse died within five years and no 706 was filed, this is a genuinely urgent conversation.

Two limits worth knowing: DSUE does not apply to the GST exemption, which cannot be ported, and remarriage can cost you a prior spouse’s DSUE.

Three separate allowances, and they stack. The annual exclusion is $19,000 per recipient for 2026 under § 2503(b), to as many people as you like, with no return required and no use of your lifetime exclusion. A married couple can split gifts and give $38,000 per recipient, though splitting does require a return.

Direct tuition and medical payments are unlimited under § 2503(e) — but must be paid straight to the school or provider. Tuition only; not room, board, books or fees.

Beyond that you use your lifetime exclusion, reporting the gift on Form 709. That is not a tax, only an accounting entry against the same $15 million. Larger gifts are also unlimited to a spouse who is a U.S. citizen, and to charity.

Before gifting appreciated property, weigh the lost basis step-up. Gifting a low-basis asset to save an estate tax you would never have owed is a common and expensive mistake.

A grantor retained annuity trust. You transfer an asset into an irrevocable trust and retain the right to a fixed annuity for a term of years. The gift is the value transferred minus the present value of your retained annuity, computed using the IRS § 7520 rate for that month. Structure the annuity to nearly equal the transfer and the taxable gift approaches zero — a “zeroed-out” GRAT.

Everything the asset earns above the § 7520 hurdle passes to your beneficiaries free of gift and estate tax. It is authorized by § 2702, which values a retained interest at zero unless it is a “qualified interest” — the fixed annuity is what qualifies it.

The mortality risk is the catch: if you die during the term, some or all of the trust is pulled back into your estate and you are roughly where you started, minus fees. That argues for shorter terms and for rolling GRATs. It works best with a volatile or sharply appreciating asset — pre-IPO stock, a concentrated position, a business about to be sold. It works poorly with steady, low-return assets, because there is nothing above the hurdle to capture.

An IDGT is deliberately drafted so you remain the owner for income tax purposes under the grantor trust rules of IRC §§ 671–679 while the assets are outside your estate for transfer tax purposes. The usual mechanism is a power to reacquire trust assets by substituting property of equivalent value, held in a nonfiduciary capacity, under § 675(4)(C). The IRS has confirmed in Rev. Rul. 2008-22 and Rev. Rul. 2011-28 that a properly drafted substitution power does not cause estate inclusion.

Two benefits follow. You can sell an appreciating asset to the trust for a promissory note with no capital gain recognized, because you are selling to yourself for income tax purposes. And you pay the trust’s income tax personally, which lets the trust grow untaxed while your own estate shrinks by the amount of tax paid — a transfer to your beneficiaries that is not treated as a gift at all.

It is technical and it requires real care: adequate seed capital in the trust, a defensible valuation, a note bearing at least the applicable federal rate, and genuine respect for the formalities. It is also one of the most effective tools available for a family business or farm.

This is the central Missouri version of the problem, and there are four workable answers.

Life insurance in an ILIT is the cleanest: a death benefit outside the estate under § 2042, available immediately, sized to the projected tax. Freeze techniques — a GRAT, or a sale to an IDGT — move future appreciation out now so the taxable value stops growing. Valuation discounts for lack of control and marketability can materially reduce the reported value of transferred interests. And deferral: IRC § 6166 allows the estate tax attributable to a closely held business interest to be paid in installments over as long as fourteen years where the interest exceeds 35 percent of the adjusted gross estate.

Special use valuation under § 2032A can also value qualifying farm and business real property at its actual use rather than its highest and best use, subject to a statutory cap and a recapture period if the family stops farming it.

Start early. Every one of these works better applied years in advance, and several are unavailable once a sale is already in motion. See also business continuity planning.

A second, separate 40 percent tax designed to stop families from avoiding a round of estate tax by leaving property directly to grandchildren. It is imposed by IRC § 2601, with the rate set by § 2641 as the maximum estate tax rate multiplied by the inclusion ratio.

You have a GST exemption equal to the basic exclusion — $15,000,000 for 2026 under § 2631(c). Allocated properly to a trust, it makes that trust permanently exempt: an inclusion ratio of zero means no GST tax on that trust ever, no matter how much it grows or how many generations it serves.

Two traps. GST exemption is not portable between spouses — unlike the estate tax exclusion, it dies with the person who did not use it. And automatic allocation rules produce the wrong result surprisingly often, so allocation should be made affirmatively on a timely Form 709 rather than left to default.

It depends almost entirely on basis and on growth, and the honest answer for many families is now: wait.

The case for using it now: you own an asset likely to appreciate substantially, and moving it out today removes all future growth from your estate. Interest rates and valuations may also be favorable to a particular technique. And for very large estates the exclusion is a use-it-or-lose-it allowance in the sense that it does not compound.

The case for waiting: gifted property carries your basis under § 1015, while property held until death gets a step-up under § 1014. If you will not owe estate tax anyway, gifting a low-basis asset converts a tax you would not have paid into a capital gains tax your children will. The sunset that used to force the decision is gone.

The middle path most families should consider: gift assets with high basis or ones you expect to grow sharply, keep low-basis appreciated assets for the step-up, and use annual exclusion gifts and direct tuition and medical payments continuously since they cost nothing.

It is the interest rate the IRS publishes monthly for valuing split-interest transfers — annuities, life estates, terms of years, remainders and reversions. Under IRC § 7520 it equals 120 percent of the applicable federal mid-term rate, rounded to the nearest two-tenths of a percent.

It is the hurdle that decides whether several techniques work. A GRAT transfers value only to the extent the asset outperforms it. A charitable lead annuity trust produces a bigger charitable deduction when it is low. Conversely a charitable remainder trust and a QPRT generally work better when it is high.

Because it resets every month, timing matters, and the right technique in a high-rate month differs from the right one in a low-rate month. The rate was 5.2 percent for August 2026 and 5.4 percent for September 2026 — check the current IRS table rather than relying on any figure printed on a webpage.

Qualified terminable interest property, under IRC § 2056(b)(7). It qualifies for the unlimited marital deduction — so no tax at the first death — while letting you decide who receives the property after your spouse dies.

The requirements are strict. The surviving spouse must be entitled to all the income for life, payable at least annually, and no one — including the spouse — may have power during the spouse’s life to appoint the property to anyone other than the spouse. The executor must make an irrevocable election on the estate tax return. The property is then included in the surviving spouse’s estate under § 2044.

It is the standard answer for a second marriage: your spouse is provided for during their lifetime, and your children from the first marriage receive what remains — rather than depending on the survivor’s goodwill. Note that if your spouse is not a U.S. citizen the marital deduction is unavailable unless the property passes to a qualified domestic trust under § 2056A.

Form 706 is due nine months after the date of death under IRC § 6075(a), with a six-month extension of time to file available on Form 4768.

An extension of time to file is not an extension of time to pay. The tax itself is due at nine months, and interest runs from that date regardless of any filing extension. Separate relief exists — § 6161 for hardship extensions and § 6166 for closely held business installments — but each has to be requested and justified.

Practically, nine months is short. Appraisals of real estate and business interests take months, and a valuation dispute takes longer. An executor who starts the appraisal work in month seven is already behind. See estate tax and complex administrations.