The first thing you should know about estate taxes is this: you probably don’t have to worry about them. There is a federal estate tax exclusion that is a prescribed amount that can be transferred tax-free, and it is $13.99 million per person in 2025.
State-Level Taxes
Here in Oklahoma, we do not have a state-level estate tax, but 12 states do impose estate taxes. If you own property in one of these states, the tax in that state would be applicable if its value exceeds that state’s exclusion.
Exclusions in the individual states are lower than the federal estate tax exclusion in most instances. The lowest state-level exclusion in the country is $1 million in Oregon.
Inheritance Tax
An inheritance tax is a different type of tax. It is not levied on the entire taxable portion of an estate before it is distributed to the heirs. This tax would be imposed on distributions to each beneficiary that is not exempt.
We do not have a federal inheritance tax, and there are only five states that have state-level inheritance taxes. Once again, there is no inheritance tax in our state.
For your information, the states with inheritance taxes are New Jersey, Maryland, Nebraska, Kentucky, and Pennsylvania.
Estate Tax Efficiency Strategies
If your estate is going to be exposed to the estate tax, steps can be taken to mitigate the damage. First, there is an unlimited marital estate tax deduction. That means you can transfer any amount of property to your spouse free of taxation if your spouse is an American citizen. It’s called a “deduction” because the assets are removed from your taxable estate to the taxable estate of your spouse.
The exclusion is portable, so a surviving spouse can use the exclusion that would have been available to their deceased spouse. In addition to the estate tax, there’s a gift tax, and the two taxes are unified under the tax code.
This means that you would be using some of your $13.99 million exclusion if you give large tax-free gifts. However, in addition to the unified gift and estate tax exclusion, there is a separate annual gift tax exclusion.
In addition, in 2025 you can give up to $19,000 to any number of people each calendar year free of taxation without using any of your multimillion-dollar gift and estate tax exclusion. You can gift beyond that amount to cover some education and medical expenses.
The utilization of this annual exclusion is one way that you can transfer assets in a tax-free manner. If you are married, you and your spouse could each give $19,000 to an unlimited number of gift recipients every year.
You can also use the annual exclusion to distribute ownership interests in a family limited partnership or your interest in a limited liability company. It can be used to fund certain types of trusts as well.
On the subject of trusts, you surrender incidents of ownership when you convey assets into an irrevocable trust. This means those assets would no longer be part of your estate for tax purposes.
The generation-skipping trust is a legacy wealth trust that is often utilized. As the name suggests, your grandchildren would be the beneficiaries. You would skip your children for the ultimate distribution, but they would not be disinherited. During a child’s lifetime, they could be lifetime beneficiaries and receive distributions from the trust. While they are living, the estate tax would not be levied.
It would be a factor after their death, but there would be one round of taxation over two generations. This is one of several different estate tax efficiency trusts that can be part of your wealth preservation plan.
Take Action Today!
Today is the day to end the procrastination if you do not have an estate plan in place. You can schedule a consultation at our Oklahoma City estate planning office if you call us at 405-843-6100.
The number for our Tulsa location is 918-615-2700, and there is a contact form on this site you can fill out if you would rather send us a message.
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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