If you live in Metro Detroit or anywhere in Southeast Michigan, you may wonder whether your estate will owe taxes after you pass away. The good news: most Michigan families will not owe federal estate tax. The better news: understanding how estate and gift taxes actually work can help you make smarter planning decisions that protect your family and preserve more of your wealth.

Here is what many Southeast Michigan residents do not realize: Michigan does not currently impose a state-level estate tax or inheritance tax. That means the only estate tax that might apply to your family is the federal estate tax, and only if your estate exceeds very high thresholds.

However, “no estate tax” does not mean “no tax planning needed.” Income taxes on inherited retirement accounts, capital gains considerations, and probate costs can still significantly impact what your beneficiaries actually receive. This guide explains the federal estate and gift tax rules for 2026, clarifies common misconceptions about Michigan taxes, and outlines strategies Southeast Michigan families can use to minimize their overall tax burden.

Federal Estate and Gift Tax Basics for 2026

The federal estate and gift tax system uses a unified lifetime exemption. For 2026, this exemption is $15,000,000 per individual or $30,000,000 per married couple using portability. This means you can transfer up to $15 million during your lifetime and at death combined before any federal estate tax applies.

The federal estate tax rate on amounts exceeding this exemption is 40 percent.

For most Southeast Michigan families, this threshold is reassuringly high. Unless your combined assets—including your home, retirement accounts, life insurance proceeds payable to your estate, investments, and business interests—exceed $15 million, federal estate tax is unlikely to be a concern.

Annual Gift Tax Exclusion

Separately from the lifetime exemption, the federal annual gift tax exclusion allows you to give up to $19,000 per recipient in 2026 without using any of your lifetime exemption or filing a gift tax return. Married couples can effectively double this to $38,000 per recipient through gift splitting.

These annual exclusion gifts are a powerful planning tool. You can gift $19,000 each year to as many people as you wish—children, grandchildren, family friends—without any gift tax consequences. Gifts for tuition paid directly to educational institutions or medical expenses paid directly to providers are excluded entirely, regardless of amount.

Michigan Does Not Have a State Estate or Inheritance Tax

One of the most common misconceptions among Metro Detroit residents is that Michigan imposes its own estate or inheritance tax. It does not.

Michigan’s inheritance tax, codified under MCL 205.201 et seq., applies only to estates of decedents who died on or before September 30, 1993. For anyone who has passed away since that date, no Michigan inheritance tax is owed. Michigan’s estate tax was a “pick-up” tax tied to the federal credit for state death taxes. When federal law eliminated that credit, Michigan’s estate tax effectively became zero—meaning Michigan residents today face only potential federal estate tax liability.

This also means there is no “Wayne County inheritance tax,” “Oakland County estate tax,” or any county-level death tax in Michigan. While probate courts in Wayne, Oakland, and Macomb Counties administer estates under MCL 700.1101 et seq., they do not impose separate taxes. Court filing fees and administrative costs apply, but these are not taxes.

When Other States’ Taxes Might Apply

If you own real property in another state, that state’s tax rules may apply to that property. For example, states like Maryland, Pennsylvania, and New Jersey impose inheritance taxes that could affect Michigan residents who own vacation homes or investment property there. Proper planning can help minimize this exposure.

Gifting Strategies for Southeast Michigan Families

Strategic gifting is one of the most effective ways to reduce the size of your taxable estate while providing meaningful support to your family during your lifetime.

Annual Exclusion Gifting

By gifting up to $19,000 per person annually ($38,000 for married couples), you can transfer significant wealth over time without touching your lifetime exemption. Common uses include helping adult children with home down payments, funding 529 college savings plans for grandchildren, or simply providing financial support during your lifetime when your family can benefit most.

Lifetime Gifts Above the Annual Exclusion

Gifts exceeding the annual exclusion require filing IRS Form 709 and reduce your available lifetime exemption. However, they typically do not trigger immediate tax unless you have already used your full $15 million exemption.

For Southeast Michigan families with closely held businesses, significant real estate holdings, or concentrated investment positions, lifetime gifting can remove future appreciation from your taxable estate. If you gift an asset worth $500,000 today and it grows to $2 million by your death, that $1.5 million of appreciation passes to your beneficiaries free of estate tax.

Coordinating Gifts with Michigan Planning Tools

Gifting strategies work best when coordinated with your overall estate plan. For example, rather than making outright gifts to children who may face divorce or creditor risks, you might establish irrevocable trusts that protect gifted assets while still removing them from your taxable estate.

Tax-Efficient Tools: How Trusts Work in Michigan

Trusts are versatile planning tools, but understanding what they can and cannot do for taxes is essential.

Revocable Living Trusts

A revocable living trust is the foundation of many Michigan estate plans. However, it does not reduce federal estate tax. Because you retain control over the trust during your lifetime, all assets in a revocable trust remain part of your taxable estate.

What revocable trusts do accomplish is significant: they avoid probate, maintain privacy, provide for management during incapacity, and streamline administration for your family. For most Southeast Michigan families who are below the federal estate tax threshold, these benefits are the primary reasons to use a trust.

Credit Shelter Trusts for High-Net-Worth Couples

Married couples with combined estates approaching or exceeding $30 million may benefit from credit shelter (bypass) trust planning. These structures ensure both spouses’ exemptions are fully utilized and can protect appreciation from estate tax in the surviving spouse’s estate.

Irrevocable Trusts for Estate Tax Reduction

For families with genuine estate tax exposure, irrevocable trusts can remove assets from the taxable estate. Common structures include irrevocable life insurance trusts (ILITs), which keep life insurance proceeds outside your estate, and various grantor trusts used for wealth transfer.

These strategies require careful implementation and are most appropriate for high-net-worth households. Working with an experienced estate planning attorney is essential.

Lady Bird Deeds and Michigan Property Planning

Michigan’s enhanced life estate deed, commonly called a Lady Bird deed, allows you to transfer real property to beneficiaries at death while retaining full control during your lifetime. This tool avoids probate and may offer Medicaid planning benefits, though it does not change your federal estate tax liability.

When Do Taxes Actually Become a Concern?

For practical planning purposes, here is how to think about tax thresholds as a Southeast Michigan family:

• Federal estate tax concern: If your total estate (including life insurance, retirement accounts, real estate, investments, and business interests) exceeds $15 million individually or $30 million as a married couple.

• Income tax on inherited retirement accounts: The SECURE Act’s 10-year rule requires most non-spouse beneficiaries to withdraw inherited IRA and 401(k) funds within 10 years, potentially pushing them into higher tax brackets. This affects families at all wealth levels.

• Capital gains considerations: Inherited assets generally receive a stepped-up basis, eliminating capital gains on appreciation during the decedent’s lifetime. Proper planning ensures your beneficiaries receive this benefit.

• Probate costs and delays: While not a tax, Michigan probate can involve court fees, attorney fees, and administrative delays. Trusts and proper beneficiary designations can minimize these costs.

Most Metro Detroit families are well below the $15 million federal threshold. For these families, the primary tax planning focus should be minimizing income taxes on retirement account distributions, ensuring assets receive stepped-up basis treatment, and avoiding unnecessary probate costs.

Frequently Asked Questions About Estate Taxes in Southeast Michigan

Does Michigan have a state estate tax?

Michigan does not currently impose a state estate tax. The only estate tax that may apply to Michigan residents is the federal estate tax, which affects estates exceeding $15 million per individual in 2026. Michigan’s prior inheritance tax was repealed for decedents dying after September 30, 1993.

Is there an inheritance tax in Wayne, Oakland, or Macomb County?

No. Michigan counties do not impose separate inheritance or estate taxes. Wayne, Oakland, and Macomb County probate courts administer estates under state law, but they do not levy their own death taxes. Your beneficiaries will not owe a county-level inheritance tax on what they receive from your estate.

How much can I gift to my children each year without paying gift tax?

In 2026, you can gift up to $19,000 per recipient without gift tax consequences or filing requirements. Married couples can effectively give $38,000 per recipient using gift splitting. Amounts above these thresholds use your lifetime exemption but typically do not cause immediate tax.

Will my Southeast Michigan home push my estate over the federal estate tax limit?

Real estate alone rarely triggers federal estate tax. The $15 million exemption applies to your total estate, including your home, retirement accounts, investments, life insurance, and other assets combined. Most Metro Detroit homeowners are well below this threshold, though estate planning remains important for probate avoidance and income tax management.

How do trusts help with taxes if Michigan does not have an estate tax?

Trusts provide benefits beyond estate tax reduction. For most Michigan families, trusts avoid probate, protect beneficiaries from creditors and divorce, provide for special needs planning, and ensure privacy. For high-net-worth families above the federal threshold, irrevocable trusts can remove assets from the taxable estate and shift future appreciation to beneficiaries.

Take the Next Step: Protect Your Family’s Financial Future

Understanding estate and gift taxes is the first step toward a comprehensive plan that protects your family. Even if federal estate tax is unlikely to affect your estate, proper planning addresses income taxes on inherited retirement accounts, probate costs, and family protection concerns that affect Michigan families at every wealth level.

At Boroja, Bernier & Associates, our estate planning attorneys help families throughout Michigan create customized plans that minimize taxes, avoid probate, and protect what matters most. With our main office in Shelby Township and satellite offices in Troy, Ann Arbor, and Lansing, we provide estate planning services to residents across the state.

To schedule a consultation with the Michigan estate planning attorneys at Boroja, Bernier & Associates, call our law offices at (586) 991-7611. We will help you understand exactly how federal tax rules apply to your situation and create a plan that gives your family clarity and protection.