Estate & Gift Taxes: What Michigan All Families Should Know

Every few years, the federal estate and gift tax system gets thrown back into the political spotlight. Congress debates it, candidates argue about it, pundits call it everything from a “loophole for billionaires” to a “small-business killer.” Meanwhile, most Michigan families wonder: Does any of this actually apply to me?

For almost everyone, the answer is no, at least not today. For 2026, the federal estate and gift tax exemption sits at $15 million per person, or $30 million for a married couple, and it's adjusted annually for inflation. Factor in various estate planning techniques designed to reduce the estate tax, and the practical threshold for when these taxes bite is even higher. That means only the truly ultra-wealthy, a tiny fraction of U.S. households, will ever pay federal estate tax under the current tax laws.

But the tax laws don’t stay the same for long. Congress has changed the estate tax more than a dozen times in the last 40 years. So, if Congress makes changes, the current high exemption could be reduced dramatically and suddenly, many more families, especially those with growth oriented investments, will find themselves closer to the line if not over.

This is why even Michigan families who aren’t “estate-tax people” should understand the landscape and build a little flexibility into their estate plan.

Why Estate Tax Is a Political Football

Unlike income taxes, the federal estate tax is philosophically charged. Some argue it punishes saving and family business ownership, others that it is a “double” tax. Yet other people argue the heirs of the wealth have not earned it, so they should be taxed just like those of us who go out and earn a living. Because of this it has become a yo-yo tax law.

Pre-Planning Without Over-Planning.

For families well under $30 million, it is rarely recommended to utilize aggressive estate-tax tactics like:

  • Large irrevocable gifting trusts
  • SLATs (Spousal Lifetime Access Trusts)
  • Charitable lead or remainder trusts
  • Freeze techniques

While these options have their place. However, wealthy families nowhere near the taxable territory should just educate themselves about these and other options in case (or for when) the tax laws change again.

The more suitable planning for most affluent Michigan families focuses on flexibility, income tax-basis optimization, and future proofing. That means designing your estate plan so it works whether the exemption is $15 million per person or, as many left leaning politicians have suggested, $1 million or less.

Good flexible tools include:

  • Discretionary trusts with tax clauses that can be toggled on or off
  • Maximizing the portability elections for surviving spouses
  • Disclaimer planning, so the surviving spouse or heirs can shift assets into tax-efficient trusts only if needed
  • Tiered beneficiary designations on IRAs, life insurance, and brokerage accounts
  • Gifting strategies that are optional—not mandatory

These tools avoid the irreversible commitments of hardcore estate-tax planning but still leave the door open if Congress makes changes.

Lifetime Gifting: A Practical, Long-Term Hedge

Even if you’re not ultra-wealthy, gifting during your lifetime can be a great planning tool. You can give up to $18,000 per person per year (2025 limit) without touching your lifetime exemption. Larger gifts are allowed too—they just use up a portion of your lifetime exemption.

For families whose estates might one day bump into taxable territory, either under the current estate tax regime or under any future changes, lifetime gifting can serve three purposes:

  • A Hedge Against Future Tax Law Changes: Gifts made today lock in the current higher exemption. Congress can lower the exemption, but they cannot retroactively undo completed gifts.
  • A Way to Engage Heirs Early: This is a subtle but underrated benefit. Passing an investment account or a rental property interest during lifetime gives adult children (or grandchildren) the chance to learn the ropes:
  • Managing investments;
  • Budgeting;
  • Tracking income and dividends;
  • Handling tax reporting;
  • Learning financial responsibility earlier rather than later. Many Michigan parents find that modest, intentional lifetime gifting helps their heirs become better long-term stewards of the wealth they will eventually inherit.
  • Spreading Out Wealth Transfers. Giving during lifetime (in measured amounts, not reckless amounts) lets families transfer assets gradually, monitor how heirs manage them, and keep the overall plan grounded.
  • Future Increases in Value: Making gifts now enables the recipient to invest the funds, and any appreciation that is earned (capital gains, interest and dividends) also avoids estate taxes.

What Most Michigan Families Should Actually Do in Regards of Estate Taxes

You don’t need drastic, irrevocable planning unless your estate is truly approaching $30 million or you have high-growth assets that will likely push you there.

But you should:

  1. Keep your revocable trust and estate plan up to date.
  2. Build flexible provisions that allow tax-efficient structuring if needed later.
  3. Consider modest, intentional gifting as part of long-term planning.
  4. Review beneficiary designations every few years.

Estate taxation may not apply to most families—but a little early awareness, and a plan that can adapt, ensures you’ll never be caught flat-footed if Congress moves the goalposts again.