Congress Said $15M. Oregon Said $1M

Congress gave you a number. Fifteen million dollars. Per person. Thirty million for a married couple. Signed on the Fourth of July, 2025, permanent, done.

Your state gave you a different number. In Oregon, it is one million. In Massachusetts, two million. In Illinois, four million.

The gap between those two numbers is where the damage lives.

Look. In 2021, only 2,584 estates owed federal estate tax. That was at the old exemption. At fifteen million, the number falls off a cliff. The federal estate tax is a billionaire's problem now. Congress fixed a pipe that was not leaking in your house.

But twelve states and DC still run their own plumbing. Their own exemptions. Their own rates. Oregon starts taxing at one million dollars. Not fifteen million. One million. And those states did not change a thing.

So you have two pipes. The federal pipe is wide open. The state pipe is the same narrow pipe it was last year. The fifteen million headline protects estates you will never have. The state number is the one that sends a bill.

Here is how it breaks if you already planned.

A bypass trust is a box. When the first spouse dies, half the estate goes into the box. The surviving spouse can use the money. But the money belongs to the box. It skips estate tax when the second spouse dies because it was already counted once.

Standard stuff. Lawyers have written these for decades. The instruction label on the box is a formula clause. It says: fill this box with the maximum amount that can pass free of federal estate tax.

That maximum just jumped to fifteen million.

So your estate is worth four million. The formula says: put the federal max in the box. The federal max is fifteen million. The box swallows the entire four million. The surviving spouse's share? Zero.

And here is the other cost. Say you bought a house for $200,000. It is worth $500,000 now. When you die, the tax value resets to today's price. Your kids inherit it at $500,000. They sell it, no tax on that $300,000 gain. That reset is the step-up in basis. But assets in the box do not reset. They stay locked at the first spouse's date-of-death value. Your kids sell that house, they owe tax on the full $300,000 gain.

The plan you paid a lawyer to draft just cut your wife out of your estate. And handed your kids a tax bill on gains they never saw.

I mean. The formula worked fine when exemptions were lower. Congress changed the number. Nobody changed the formula.

Now here is how it breaks if you did not plan.

You heard fifteen million. You thought: I am safe. You skipped the bypass trust.

Here is what you missed. Most states do not offer portability. Portability means the surviving spouse borrows the dead spouse's unused exemption. The feds allow it. Only Hawaii and Maryland allow it at the state level. The other ten states? Use it or lose it.

Oregon couple. Three million dollar estate. No bypass trust. First spouse dies. Everything rolls to the survivor. No tax yet, because of the marital deduction. But that first spouse's one million dollar Oregon exemption? It evaporated. Nobody used it. Nobody can borrow it.

Second spouse dies. Three million dollar estate. One million dollar exemption. Oregon sends a bill for roughly $205,000.

The fifteen million headline made them feel safe. Oregon charged $205,000 anyway.

Then there is New York. This is the number you will repeat at dinner.

New York's exemption is $7,000,000. But they built a cliff into the tax code. If your estate exceeds 105% of the exemption, you lose the entire exemption. Not just on the excess. On everything. From dollar one.

So. You die with $7,400,000. That is $50,000 over the line. Your estate owes more than $136,000 in New York tax. Effective rate on that last $50,000: north of 250%.

Sure.

The most expensive fifty thousand dollars in American tax law. And New York does not offer portability either.

One number Congress gave you. One number your state kept. The first protects estates that do not need protection. The second is the only one that touches your bracket. Nobody raised it. Nobody indexed it.

And nobody told you.