Family Update
Greetings from Pittsburgh, where we're deep into our annual trip to see Grammy, Pop, my sister Lizzie, and my aunt Jeanie. The days have settled into a rhythm of jigsaw puzzles, shuffleboard tournaments, and gourmet dinners courtesy of my dad. The weather has been hot and humid, not quite Florida levels, but giving it a solid effort. The big event this trip was my dad's 80th birthday, and I got him a new TV since his old one looked like it belonged in a museum.
He watches sports on it constantly, so before we head home, we have a mission-critical task: making sure he knows how to use all the features.
Coming back always makes me notice things I forget about the rest of the year. Pittsburghers are, on the whole, considerably less tan than my neighbors in Florida. Everyone here says "yins" instead of "you guys." The roads are an absolute labyrinth, hilly and winding. Which has made me grateful for the simple, grid street layout back home. And somehow, no matter which direction you drive, you will find an Italian restaurant. Seafood restaurants are in short supply.
"Dave, is the federal government going to take half of my money when I die?"
For almost everyone reading this, no. But the myths are loud, so let's clear it up fast.
The Basics
The federal estate/gift tax only hits the portion of your estate above a threshold. For 2026, that's $15 million per person, $30 million per married couple. Below it, your heirs get everything tax-free. Above it, tax rates reach 40%. In other words, unless you have $30 million in your bank account, ignore anything you hear about the estate tax.
People who like the tax believe it:
•Stops permanent wealth dynasties. Without a tax check, fortunes just compound generation after generation.
•Only touches the very wealthy. With a $15 million exemption per person, it never reaches the family home or a normal retirement account.
•Taxes gains that were never taxed. A lot of large estates are unrealized appreciation that escaped income tax entirely during the owner's life.
People who are against the tax say that it is:
•Double taxation. Much of an estate was already taxed once as income. Taxing it again at death penalizes a lifetime of saving.
•Forces sales of businesses and farms. If the estate is illiquid, heirs may have to sell the very asset they inherited just to pay the bill.
•Hits almost nobody, at real cost. Critics point out it affects a tiny fraction of estates while generating significant planning cost and complexity.
Two Examples
The Johnsons don't pay it. Bob managed a plant, and Carol taught school for 30 years. Combined estate: $1.4 million. Well under the $30 million couple's exemption, their kids inherit every dollar tax-free. This is all of you.
Richard Whitfield does pay taxes. He was not married when he died. His estate is worth $22 million. He doesn't pay any estate tax on the first $15 million. The remaining $7 million gets taxed up to 40%, meaning his heirs could owe close to $2.8 million. This is where advance planning can change the outcome. Honestly, the rich have been finding ways around the estate tax since it was introduced.
The Gift Tax, explained simply (or at least as simply explained as possible)
In my entire career, I'm not sure if I ever met a client who understood this concept, so hold on to your hats.
If you give money away, it permanently reduces your $15 million state tax limit, but you don't have to pay taxes on it.
Margaret starts with a full $15 million exemption. In 2026, she buys her granddaughter a house. Margaret gives her $1,000,000. Margaret now has $14,000,000 left in her estate tax exclusion.
A decade after that, she helps her son start a business with a $1 million gift. Margaret is down to $13,000,000.
Near the end of her life, she gives $2 million to a grandchild for medical school and a home. Margaret's estate tax limit now sits at $11,000,000.
Margaret dies with an estate worth $13 million. She still has $11,000,000 of exemption left, so only $2,000,000 of her estate is exposed to tax, taxed at rates up to 40%. Her family owes roughly $800,000, rather than paying tax on the full $13 million.
All of his is to stop people from taking all their money and giving it to their kids without having to pay any estate taxes. You can give up to $15 million, and then you'll pay estate taxes if you give more.
That's the whole point of tracking gifts. When you hear somebody say that you can give away $19,000 a year in gifts, all that means is that if you give more than that, it's going to come off of your exemption, which means absolutely nothing unless you are mega-rich.
The Takeaway
None of you will ever owe federal estate tax or gift tax. Give away as much as you want to whoever you want. If it's more than $19,000 per person, you will have to file a form. That's it. Just get the $19,000 thing out of your head. It means nothing. Give your grandson a $1,000,000 mansion, and when you die, you will have to pay estate taxes on the amount over $14,000,000 instead of $15,000,000. And you'll have a spoiled grandson.
Be Blessed,
Dave