The Lifetime Exemption

A significant part of estate planning is deciding how to transfer assets outside of your estate during your lifetime and after death. Federal gift and estate taxes in the United States are currently structured such that each citizen is given an amount that they can transfer free of tax, an amount known as the “lifetime exemption”.

For 2025, the lifetime exemption is $13.99M per person (or $27.98M per married couple), meaning people only pay gift or estate taxes when they transfer more than $13.99M during their life and/or after their death.

For gifts and estates above the exemption amount, a tax rate of 40% applies. Therefore, an estate of $20M that has not yet used any of its lifetime exemption would have a taxable estate of $6.01M and owe estate tax of $2.404M.

Married couples are able to share their lifetime exemption. Through a concept called “portability,” a surviving spouse can use the remainder of a deceased spouse’s estate tax exemption, effectively making the lifetime exemption for couples $27.98M (for 2025).

Lifetime exemption amounts are currently at an all-time high. Estate tax exemptions and rules have undergone multiple changes over the last few decades:

• In the year 2000, the exemption amount was $675,000.
• In 2002, the exemption was increased to $1M.
• In 2009, the exemption increased to $3.5M.
• In 2010, it increased to $5M.
• In 2017, the Tax Cuts and Jobs Act (TCJA) doubled the existing exemption (to $10M) and added an inflation-indexed increase each year, resulting in 2021’s total of $11.7M.
• In 2023, the exemption was increased to $12.92M.
• In 2024, the exemption was increased to $13.61M.
• In 2025, the exemption increased to $13.99M.
• In 2025, the One Big Beautiful Bill Act (OBBBA) permanently increased the exemption to $15M indexed for inflation, starting January 1, 2026.

To maximize your tax exemption, review your gift and estate strategy each year to ensure that your plans are still optimized to your financial situation and the current tax law.