Estate Tax Planning for Tennessee Families

Tennessee repealed its own state estate tax back in 2016, which was good news for families here. But the federal estate tax is still very much in play, and for families with significant assets, understanding how it works and what can be done about it is an important part of estate planning.

The good news is that most Tennessee families won’t be affected by federal estate tax at current thresholds. The not-so-good news is that those thresholds are scheduled to change, and for families with growing estates, planning ahead makes a real difference.

How the Federal Estate Tax Works

The federal estate tax applies to the value of everything you own at death above the applicable exemption amount. The IRS adjusts this threshold periodically, and the current exemption is substantial enough that most individual estates don’t exceed it.

The challenge is that the Tax Cuts and Jobs Act, which significantly raised the exemption amount, is scheduled to sunset at the end of 2025 unless Congress acts. If that happens, the exemption reverts to roughly half its current level, adjusted for inflation. For families whose estates are in the range that might be affected by that change, planning now rather than waiting for legislative certainty is the more prudent approach.

When an estate does exceed the exemption, the federal estate tax rate on the excess is 40 percent. That’s not a trivial number.

Patterson Bray PLLC works with Memphis families to build estate plans that address tax exposure thoughtfully, making sure every legal strategy available is considered.

Strategies That Reduce Federal Estate Tax Exposure

Several well-established legal tools can reduce the taxable value of your estate while still benefiting your family and the causes you care about.

Annual gifting. The IRS allows individuals to give a certain amount per recipient per year without triggering gift tax or eating into the lifetime estate tax exemption. Consistent annual gifting over time can meaningfully reduce a taxable estate.

Irrevocable trusts. Certain trust structures remove assets from your taxable estate while still providing benefits to your family. Irrevocable life insurance trusts, spousal lifetime access trusts, and grantor retained annuity trusts are all tools that estate planning attorneys use in this context depending on the client’s goals.

Charitable giving strategies. Charitable remainder trusts, charitable lead trusts, and direct bequests to qualified organizations all reduce the taxable estate while supporting causes that matter to you. These strategies can be particularly effective for families with philanthropic goals who are also looking to minimize tax exposure.

Portability between spouses. Married couples can elect to transfer any unused exemption from the first spouse to die to the surviving spouse, effectively doubling the protection available to the combined estate. This election isn’t automatic and requires a timely estate tax return filing even if no tax is owed.

Tennessee Has Its Own Considerations

While Tennessee doesn’t have a state estate tax, it does have an inheritance tax on certain transfers. Understanding how state and federal rules interact is part of building a complete plan, and it’s an area where working with a Memphis estate planning lawyer who knows Tennessee law specifically makes a real difference.

Don’t Wait for the Law to Change

The potential reduction in the federal estate tax exemption makes this a particularly time-sensitive area of planning. Strategies that are available today may be less effective or unavailable depending on how federal law evolves. Acting now gives families the most flexibility and the broadest range of options.

If your estate might be affected by federal estate tax, or if you’re not sure whether it will be, the Memphis estate planning lawyer team at Patterson Bray PLLC can help you evaluate your exposure and build a plan that protects what you’ve worked to build.