Legal Definitions - estate tax threshold

The estate tax threshold is the maximum amount of money that an individual can leave behind in their estate without incurring estate taxes. This threshold is also known as the applicable exclusion amount, which includes both gifts and estates. The current estate tax threshold is set at $11,700,000 until 2026.

For example, if a person's estate is worth $10,000,000 and they did not make any gifts during their lifetime, their estate would not be subject to estate taxes. However, if they made gifts totaling $2,000,000 during their lifetime, their applicable exclusion amount would be reduced to $9,700,000, and their estate would be subject to estate taxes on the remaining $300,000.

The estate tax threshold is important for individuals who want to plan their estates and minimize their tax liability. By staying within the applicable exclusion amount, individuals can ensure that their heirs receive the maximum amount of their estate without having to pay a significant amount in taxes.