You need to file a federal estate tax return only if the decedent died in 2026 with a gross estate plus lifetime taxable gifts above $15 million. Below that number, Form 706 is not required, though many executors file anyway to preserve a surviving spouse’s unused exemption. State rules are a separate question, and several states require a return at thresholds as low as $1 million.
The $15 Million Federal Threshold
For deaths in 2026, the Basic Exclusion Amount is $15 million.1Internal Revenue Service. What’s New — Estate and Gift Tax If the combined value of the gross estate plus all adjusted taxable gifts made during the decedent’s lifetime exceeds that amount, the executor must file Form 706. The filing requirement is triggered by the size of the estate, not by whether tax is actually owed. An estate that clears the threshold but zeros out through deductions still has to file.
Lifetime gifts matter here and are easy to overlook. Every gift above the annual exclusion (currently $19,000 per recipient) uses up part of the $15 million lifetime exemption.1Internal Revenue Service. What’s New — Estate and Gift Tax A gross estate of $13 million looks safely under the line, but if the decedent gave away $3 million in taxable gifts over their lifetime, the total crosses the threshold and a return is required.
The $15 million figure comes from a permanent increase enacted in mid-2025 that eliminated a scheduled reduction which would have roughly halved the exemption.2Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax The amount continues to adjust for inflation in future years.
What Actually Counts in the Gross Estate
The gross estate is much broader than the probate estate. It captures the fair market value of everything the decedent had a financial interest in at death, including assets that pass automatically to a named beneficiary or joint owner. This is where estates get pushed over the threshold by owners who assumed those assets did not count.
- Real estate, bank and brokerage accounts, vehicles, and business interests, at full fair market value.
- Life insurance proceeds, if the decedent owned the policy or kept any control over it, such as the power to change beneficiaries, borrow against it, or cancel it. The payout is included even when it goes directly to a named beneficiary.3Office of the Law Revision Counsel. 26 USC 2042 – Proceeds of Life Insurance
- IRAs, 401(k)s, and similar retirement accounts at their full balance, regardless of the named beneficiary.
- Joint property with a non-spouse, at full value, unless the surviving owner can document their own contributions toward the purchase.4Office of the Law Revision Counsel. 26 USC 2040 – Joint Interests
- Joint property with a spouse, at half value in the estate of the first spouse to die, regardless of who paid for it.4Office of the Law Revision Counsel. 26 USC 2040 – Joint Interests
- Revocable trust assets, and any property in a trust where the decedent kept the right to revoke, receive income, or control distributions.
The joint-property rule catches families off guard. Adding an adult child to a bank account or deed for convenience means the whole account defaults into the parent’s estate at death unless the child can prove they put their own money in.
Why You Might File Even When You’re Under
An estate below $15 million has no legal duty to file Form 706. But if the decedent leaves a surviving spouse, filing anyway to make the portability election is often worth it.
Portability lets the surviving spouse inherit whatever portion of the $15 million exemption the deceased spouse did not use. This unused amount, called the Deceased Spousal Unused Exclusion (DSUE), can push the survivor’s combined exemption as high as $30 million. The election is not automatic. The executor has to file a complete Form 706 and affirmatively elect portability on the return.1Internal Revenue Service. What’s New — Estate and Gift Tax Both spouses must have been U.S. citizens or residents.
Executors who missed the standard nine-month deadline can still make a late portability election up to five years after the date of death under a simplified procedure that does not require a private letter ruling or user fee.5Internal Revenue Service. Revenue Procedure 2022-32
Skipping this election is one of the costlier mistakes in estate planning. A surviving spouse who later inherits from someone else, sees assets appreciate, or accumulates wealth through work can end up above the exemption with no DSUE available. The cost of preparing a portability-only return is small compared to the potential tax exposure.
State Estate and Inheritance Taxes
The federal threshold has nothing to do with state obligations. Twelve states plus the District of Columbia impose their own estate taxes, several at thresholds well below $15 million. Five states impose inheritance taxes, which are paid by beneficiaries rather than the estate. Maryland has both.
Approximate 2026 estate tax filing thresholds by state:
- Connecticut: matches the federal exclusion
- District of Columbia: about $4.9 million, adjusted annually for inflation
- Hawaii: $5.49 million
- Illinois: $4 million
- Maine: $7.16 million
- Maryland: $5 million
- Massachusetts: $2 million
- Minnesota: $3 million
- New York: $7.35 million
- Oregon: $1 million
- Rhode Island: $1.84 million
- Vermont: $5 million
- Washington: $3.08 million
The five inheritance-tax states are Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Rates vary with the beneficiary’s relationship to the decedent, and close family members are often exempt or taxed lightly.
Check the rules in the decedent’s state of residence and in any state where they owned real property. A resident of a no-tax state who owned a vacation home in Oregon can still trigger an Oregon filing on that property.
Who Has to File
The executor named in the will, or the personal representative appointed by the court, is responsible for Form 706. If no one has been formally appointed, the IRS treats anyone in actual or constructive possession of the decedent’s property as the executor for filing purposes.6Internal Revenue Service. Instructions for Form 706 A family member managing the decedent’s assets can be on the hook for the return even without going through probate.
The Deadline and Getting an Extension
Form 706 is due nine months after the date of death.6Internal Revenue Service. Instructions for Form 706 The deadline applies to both filing the return and paying any tax owed.
An automatic six-month extension is available by filing Form 4768 before the original deadline. The extension covers filing, not payment. Estimated tax owed still has to be sent with the extension request, or interest and penalties start running.
Missing the deadline without reasonable cause triggers two penalties that can run at the same time. Failure to file costs 5% of the unpaid tax per month, capped at 25%.7Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax Failure to pay costs 0.5% per month on the unpaid balance, also capped at 25%.8Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax Interest accrues on top of both. The reasonable-cause waiver exists but has a high bar; ignorance of the deadline or trouble finding records generally does not qualify.
The Basis Reporting Form That Comes With It
An estate required to file Form 706 also has to file Form 8971. That form reports the estate tax value of each inherited asset to the IRS and to each beneficiary, and the beneficiary is generally required to use that value as their cost basis for future capital gains.9Internal Revenue Service. Instructions for Form 8971 and Schedule A
Form 8971 is due 30 days after Form 706 is filed, or 30 days after it was required to be filed (including extensions), whichever comes first. Each beneficiary gets their own Schedule A listing what they inherited and its reported value.9Internal Revenue Service. Instructions for Form 8971 and Schedule A Penalties are modest per form but scale with the number of beneficiaries: $50 per form if filed within 30 days of the deadline, $250 per form if more than 30 days late, and $500 per form with no cap for intentional disregard.