Changes to inheritance tax rules are particularly important for seniors. A new federal deduction will significantly reduce the number of households that will need to pay inheritance tax. But, that doesn’t mean you can just forget about it.
Chad Cummings, a CPA and attorney, shared some crucial insights for seniors regarding inheritance tax. Here are four things to keep in mind.
Determine if You Need to Worry About Federal Estate Tax
The first thing to do is check if your estate meets the size requirement for federal estate tax under the new legislation. The One Big Beautiful Bill Act (OBBBA), which took effect on July 4, 2025, has set the federal estate tax exemption to $15 million per individual (or $30 million for married couples) starting January 1, 2026.
Cummings emphasized that the majority of seniors won’t face federal estate taxes when they pass away. However, there’s a caveat: Congress may alter these exemptions in the future, which could affect estate plans centered on the $15 million benchmark.
Don’t Overlook State Estate Taxes
For those living in states with their own estate taxes, the increased federal deduction won’t provide any relief. Cummings pointed out that seniors in states like Massachusetts and Oregon could still be liable for state estate taxes beginning at $1 million. Your state residency can complicate things; your heirs might be unexpectedly hit with a hefty tax bill if you assume federal protections apply.
Review Beneficiary Designations
It’s essential to recognize that your will doesn’t supersede what you have designated for your IRA, 401(k), or life insurance policies. “The courts will abide by what’s on file, no matter your true wishes. So, seniors really should regularly review and update beneficiary designations,” noted Cummings.
Rethink Your Charitable Giving Approach
Starting in 2026, a new adjustment in the OBBBA will add a 0.5% floor based on adjusted gross income (AGI) for itemized charitable deductions. If a donation falls below this threshold, you won’t get that deduction. However, Cummings suggested that Qualified Charitable Distributions (QCDs) from IRAs, applicable for individuals aged 70 1/2 and older, could be a more effective method for making charitable contributions.
