Michigan Estate Tax in 2026: What Changed, What You Pay, What You Don't

"How much will Michigan tax my estate when I die?" The short answer for 99 percent of Michigan families is: zero. Michigan does not have a state estate tax. The federal estate tax exemption rose to $15 million per person ($30 million per married couple) starting January 1, 2026 under the One Big Beautiful Bill Act signed July 4, 2025 -- and unlike previous tax bills, this one has no sunset provision, so the new exemption is permanent. For most Michigan families, the estate tax simply does not apply. But there are a few traps -- a narrow Michigan inheritance tax that still applies in rare cases, income tax on inherited retirement accounts, and the actual reasons middle-class Michigan estates need a plan. Here is the plain-English DIY guide.

The Bottom Line for Most Michigan Families

Three quick facts you can almost certainly rely on if you live in Michigan in 2026:

1. Michigan has no state estate tax. Per SmartAsset's Michigan estate tax guide, "Michigan is one of 38 states that have no estate tax."
2. Federal estate tax exemption is $15 million per person in 2026, $30 million per married couple with portability elections. Per the IRS, "OBBB amends section 2010(c)(3) by increasing the basic exclusion amount to $15,000,000 for calendar year 2026."
3. If your total estate is under $15 million, you will owe no federal estate tax. If you're married and both spouses use their exemption, the threshold doubles to $30 million.

Translation: if your house, retirement accounts, life insurance, and personal property combined add up to less than $15 million, you do not need to worry about federal or Michigan estate tax. The vast majority of Michigan households fall under this bar by an order of magnitude. The estate plan you need is about avoiding probate, controlling who gets what, and protecting incapacitated family members -- not about tax avoidance.

Federal Estate Tax: The $15 Million Exemption (Now Permanent)

The federal estate tax has been around in some form since 1916. For decades the exemption hovered between $600,000 and $5 million. The 2017 Tax Cuts and Jobs Act roughly doubled the exemption to about $11 million per person, but with a built-in sunset on December 31, 2025 -- meaning it was scheduled to revert to about $7 million per person in 2026.

That sunset is now gone. The One Big Beautiful Bill Act (signed July 4, 2025) made two big changes:

• Increased the exemption to $15 million per person starting January 1, 2026, with annual inflation adjustments thereafter.
• Removed the sunset. Per Morgan Lewis, "Unlike prior legislation increasing exemption amounts (such as the TCJA), the Act includes no sunset provisions, meaning that there is no need to rush to take advantage of the new, higher amount."

Key 2026 federal estate tax numbers:

• Exemption per individual: $15,000,000
• Exemption per married couple (with portability): $30,000,000
• Tax rate on amounts above the exemption: 40%
• Annual gift tax exclusion (per recipient, per year): $19,000
• Lifetime gift tax exemption (unified with estate tax): $15,000,000
• Generation-skipping transfer (GST) tax exemption: $15,000,000 (now permanent, indexed for inflation starting 2027)

The 40% tax rate only applies to dollars ABOVE the exemption. A Michigan estate worth $15,500,000 would owe federal estate tax on $500,000 = $200,000 tax. An estate worth $14,999,999 owes nothing.

Michigan State Estate Tax: There Isn't One

Michigan repealed its state estate tax effective for deaths after September 30, 1993. There has been no Michigan state estate tax for over 30 years. This means:

• Your Michigan estate owes ZERO state estate tax regardless of size.
• You do not need to file a Michigan estate tax return.
• Michigan does not "piggyback" on the federal estate tax (some states do).
• Michigan does not have a "pickup tax" tied to the federal credit (which it had until 2005).

Per Barron, Rosenberg, Mayoras & Mayoras: "Michigan does not currently have a separate estate tax; however, the federal estate tax still does apply to all, so there may be estate taxes for very large estates (those over $13.99 million in 2025, or $15 million in 2026)."

This is a meaningful advantage of being a Michigan resident over residents of states like Massachusetts ($2 million threshold), Oregon ($1 million), or Washington ($2.193 million in 2026). Michigan is one of the most estate-tax-friendly states in the country.

Michigan Inheritance Tax: The Tiny Exception

There is a Michigan inheritance tax on the books -- but it applies only to a vanishingly small group: people who inherited from someone who died on or before September 30, 1993. Per the Michigan Department of Treasury, "Yes, the Inheritance Tax is still in effect, but only for those individuals who inherited from a person who died on or before September 30, 1993."

That date is over three decades in the past. For practical purposes, no living Michigan resident owes Michigan inheritance tax on anything they inherit today. If you somehow receive a long-delayed distribution from a 1992 estate, contact a Michigan tax professional -- but otherwise, ignore it.

Income Tax on Inherited Assets (The Real Tax Risk)

The estate tax exemption is not the only tax to think about. The much more common and consequential tax on inherited Michigan assets is INCOME tax, not estate tax. Two scenarios:

Inherited retirement accounts (the SECURE Act 10-year tax bomb)

If you inherit a traditional IRA or 401(k) from someone other than your spouse, the SECURE Act (effective 2020) requires you to fully withdraw the account within 10 years. Every dollar withdrawn is ordinary income to you. For a middle-class Michigan beneficiary inheriting a $400,000 IRA, the 10-year forced distribution can cost $40,000 to $80,000 in extra federal income tax.

The fix is in our 401(k) and IRA beneficiary guide. Key point: this is income tax, not estate tax. The $15 million federal estate exemption does not help with this. You also pay Michigan income tax (4.25% in 2026) on the inherited distributions.

Step-up in basis on appreciated assets

Inherited stocks, real estate, and other appreciated assets generally get a "step-up in basis" to their fair market value at the date of death. The heir can sell immediately and pay $0 in capital gains tax. This is a major tax benefit and is NOT going away under the One Big Beautiful Bill Act.

Example: Mom bought $20,000 of Microsoft stock in 1995. By 2026 it is worth $1.2 million. If she gives it to her daughter during life, the daughter inherits the $20,000 cost basis -- and pays capital gains tax on $1.18 million when she sells. If Mom holds it and the daughter inherits it at death, the basis steps up to $1.2 million -- and the daughter pays $0 in capital gains if she sells the next day.

Strategy implication: hold appreciated investments until death rather than gifting them during life, where possible. The estate-tax exemption is so high that almost no Michigan family will benefit from making lifetime gifts of stock to "use up" the exemption.

Federal Gift Tax in 2026

You can give away up to $19,000 per recipient per year in 2026 (the "annual exclusion") without filing any tax form. Married couples can give $38,000 per recipient per year combining their exclusions. Gifts over the annual amount eat into your $15 million lifetime exemption -- you do not pay tax on them, but they reduce what you can leave at death tax-free.

Common 2026 gift planning facts for Michigan families:

• Tuition paid directly to the school is unlimited and not a gift for tax purposes.
• Medical expenses paid directly to the provider are unlimited and not a gift.
• 529 plan contributions can be "front-loaded" with 5 years of annual exclusions in a single year ($95,000 per recipient).
• Gifts between spouses (both U.S. citizens) are unlimited.
• Gifts to charity are unlimited and can reduce your taxable estate.

What Middle-Class Michigan Families Actually Need to Plan For

If your estate is under $15 million (or $30 million if married), federal estate tax is not your problem. Your estate plan should focus on:

1. Avoiding probate. Michigan probate takes 6 months to 2 years and costs 3-7% of estate value. Beneficiary designations, POD/TOD accounts, Lady Bird deeds, and revocable trusts all skip probate. (See our Michigan probate guide.)
2. Choosing who gets what. Without a will, Michigan intestate succession decides -- often not the way you would have chosen. (See dying without a will guide.)
3. Protecting minor children. Name guardians for kids under 18. (See guardian nomination guide.)
4. Handling incapacity. A durable financial power of attorney and patient advocate designation keep your family in control if you cannot make decisions. (See incapacity planning guide.)
5. Optimizing income tax on inherited retirement accounts. Name the right beneficiaries to avoid the SECURE Act squeeze.
6. Healthcare directives. Decide in advance about life support, organ donation, and resuscitation. (See healthcare directive guide.)
7. Digital assets. Set up Apple Legacy Contacts, Google Inactive Account Manager, and FADAA-compliant will language. (See digital life after death.)

Common Estate-Tax Misconceptions

1. "I should put my house in my kids' names now to avoid estate tax." Bad idea. You lose the step-up in basis, expose the house to your kids' creditors and divorces, and the federal estate exemption is so high that you almost certainly wouldn't have owed estate tax anyway. Better: a Lady Bird deed.
2. "Michigan has an inheritance tax." No, not since 1993 deaths. The line on Michigan tax forms only applies to a vanishing group of beneficiaries from pre-1994 estates.
3. "I should give away as much as possible to use my $15 million lifetime gift exemption." Only relevant if your total estate exceeds $15 million. For everyone else, hold assets and let them step up in basis at death.
4. "My life insurance counts toward the federal exemption." It depends. Life insurance you own is included in your taxable estate. Life insurance owned by an Irrevocable Life Insurance Trust (ILIT) is not. Most middle-class families do not need an ILIT.
5. "The estate tax exemption will go back down in 2026." Not anymore. The 2025 One Big Beautiful Bill Act made the $15 million exemption permanent. The TCJA sunset is gone.
6. "Trusts avoid all taxes." No. A revocable living trust avoids probate but is treated the same as your individual ownership for federal estate tax purposes. Irrevocable trusts can offer estate-tax benefits, but only matter for estates over $15 million.
7. "Michigan taxes inherited IRAs." Yes -- but as income tax (4.25% Michigan rate in 2026), not as estate tax. And only on distributions, not the entire account at once.

DIY Estate Plan in Under 2 Hours

If you've concluded that estate tax does not apply to you (almost everyone reading this), your DIY plan is straightforward:

1. Will (15 min): Michigan attorney-drafted will from CreateMIWill. Choose primary and contingent beneficiaries, personal representative, guardian for minor kids.
2. Durable financial power of attorney (10 min): Choose your agent and successor.
3. Patient advocate designation (10 min): Choose your healthcare agent and end-of-life preferences.
4. Lady Bird deed for your home (30 min): Avoid probate on real estate. Recording fee about $30. (See step-by-step recording guide.)
5. Beneficiary designations (30 min): Update 401(k), IRA, life insurance, brokerage accounts. (See retirement beneficiary guide.)
6. Funeral representative designation (10 min): Decide who controls your remains and funeral arrangements. (See guide.)

Total cost: $89 for the CreateMIWill Will Kit (six documents) plus $30-$60 in county recording fees. Compare to $1,500-$3,500 with a Michigan attorney for the same documents.

Frequently Asked Questions

Does Michigan have an estate tax in 2026?

No. Michigan repealed its state estate tax in 1993 and has not had one since. Only the federal estate tax can apply, and only if the estate exceeds $15 million per individual.

What is the 2026 federal estate tax exemption?

$15 million per individual, $30 million per married couple with portability. The exemption was made permanent by the One Big Beautiful Bill Act in 2025, with annual inflation adjustments starting in 2027.

Does Michigan have an inheritance tax?

Only on inheritances from people who died on or before September 30, 1993. For all practical purposes, Michigan has no inheritance tax in 2026.

Will my Michigan family pay any tax when I die?

Likely not on the assets themselves, unless your estate is over $15 million. Heirs may owe income tax on distributions from traditional IRAs or 401(k)s they inherit (this is income tax, not estate tax). Inherited stocks, real estate, and other appreciated assets get a step-up in basis and usually trigger zero capital gains tax.

Should I put my house in my children's names to avoid taxes?

Almost certainly not. You lose the step-up in basis, the house becomes vulnerable to your kids' creditors and divorces, and Michigan has no state estate tax anyway. A Lady Bird deed accomplishes the same probate-avoidance goal while preserving the tax benefits.

What is portability?

If one spouse dies and does not use their full $15 million exemption, the surviving spouse can elect "portability" on the deceased spouse's federal estate tax return (Form 706). This adds the unused amount to the surviving spouse's exemption. To preserve portability, the survivor must file Form 706 within 9 months of death (or up to 5 years with a late election under Rev. Proc. 2022-32). Worth doing for any couple with significant assets.

Are gifts to my kids taxable?

Up to $19,000 per recipient per year (2026) is exempt. Above that, the excess reduces your $15 million lifetime exemption -- you do not pay current tax. Married couples can give up to $38,000 per recipient per year combining their exclusions.

Does Michigan tax inherited 401(k) and IRA distributions?

Yes, as ordinary income at Michigan's 4.25% rate (2026). The federal government also taxes it as ordinary income, often at higher marginal rates due to the SECURE Act 10-year forced distribution rule.

What about Michigan property tax when I die?

If your heirs inherit a Michigan home, the assessor may "uncap" the taxable value (raise the property tax bill) under the Michigan Constitution Article IX, Section 31. A few exceptions: transfers to a spouse, child, grandchild, sibling, or qualifying transfer-on-death deed (including a Lady Bird deed) avoid the uncap. Use a Lady Bird deed to preserve the taxable-value cap.

If I move to a state with an estate tax, am I exposed?

Yes. Twelve states and Washington D.C. impose state-level estate or inheritance taxes -- Massachusetts ($2 million threshold), Oregon ($1 million), Washington ($2.193 million in 2026), and others. Moving from Michigan to Massachusetts at age 70 with a $3 million estate creates real exposure. Consult a planner before making major state moves.

What if I am over $15 million in net worth?

Then estate tax planning matters. You should work with an experienced estate planning attorney -- not the CreateMIWill DIY kits -- to set up irrevocable trusts, ILITs, GRATs, and similar advanced strategies. Our products serve middle-class Michigan families and would not address the complexity of a $15M+ estate.

Build Your Michigan Plan

For 99 percent of Michigan families, the 2026 estate tax answer is simple: zero. What you actually need is a plan that controls who gets what, avoids the probate court, protects your kids and incapacitated family members, and optimizes income tax on inherited retirement accounts. The CreateMIWill Will Kit and Trust Kit handle all of that.