What changed in 2026
The law signed July 4, 2025 set the federal estate and gift tax exemption at $15 million per person for 2026, $30 million for a married couple. It’s indexed for inflation and, unlike the previous law, has no scheduled expiration, though Congress can always change it. Estates above the exemption still face a top federal rate of 40%.
For most families, the federal estate tax is no longer the threat it once looked like. That’s good news, and it’s also where a lot of planning stops too early.
Rich on paper, short on cash
Many estates are built from things that can’t be spent quickly: farmland, a family business, rental property, the home place. When someone dies, the bills come due in cash.
- Funeral costs, final medical bills and outstanding debts.
- Mortgage and business loan payments that don’t pause.
- Legal, probate and settlement costs.
- Payroll and operating costs to keep a business running through the transition.
- Income tax on inherited traditional IRAs and 401(k)s, which most non-spouse heirs must empty within ten years.
Without cash, the family’s choices narrow fast: borrow against the business, sell land at a bad time, or sell to whoever can close quickly. The exemption doesn’t change any of that.
In Kentucky, the relationship matters
Kentucky has no estate tax, but it does have an inheritance tax, and it depends on who receives the property. Spouses, parents, children, grandchildren and siblings are exempt. Nieces, nephews, sons- and daughters-in-law, aunts, uncles and great-grandchildren pay between 4% and 16%. Everyone else, including cousins, friends and unmarried partners, pays between 6% and 16%.
Life insurance payable to your estate is listed among the property subject to that tax. Naming the right beneficiaries on a policy, instead of the estate, is one of the simplest pieces of planning available.
Fair isn’t always equal
The hardest estate question in many families has nothing to do with tax. One child works the farm or runs the business. The others don’t. Leaving the operation to all of them equally can force a sale or a partnership nobody wanted. Leaving it to one can feel unfair to the rest.
Life insurance is how many families solve this. The child who’s staying receives the operation. A death benefit, generally received free of income tax, goes to the others. Everyone is treated fairly, and nobody has to sell the land to make it so.
If your estate is still above the line
For estates that may exceed $15 million, or $30 million for a couple, liquidity to pay a 40% tax bill still matters. A policy owned by an irrevocable life insurance trust can keep the death benefit outside the taxable estate. Transferring a policy you already own into a trust generally needs to happen more than three years before death for it to stay out. Wills and trusts are handled through our partner attorneys; we coordinate the insurance with them and with your CPA.
Where to start
Add up what your family would need in cash in the first six months and compare it with what they could reach without selling anything. The difference is your liquidity gap. For the conversations that should go with that number, read what your family should know about your estate plan.
General educational information. Your circumstances, applicable requirements and specific contract terms belong in an individual review with the appropriate professionals.
← All insights