Does North Carolina Have an Estate or Inheritance Tax in 2026?

Federal Estate Tax Basics

The federal estate tax is a transfer tax imposed on the value of property passing at death above an inflation-indexed exemption amount. The governing statute is the Internal Revenue Code, Subtitle B, Chapter 11 (sections 2001 through 2210).

• 2026 exemption: $15,000,000 per individual under IRC § 2010(c), as amended by the One Big Beautiful Bill Act ($30,000,000 per married couple with portability).
• 2025 exemption: $13,990,000 per individual under IRC § 2010(c). A married couple can shield up to $27,980,000 with portability.
• Top rate: 40% on amounts above the exemption (IRC § 2001(c)).
• Portability: The surviving spouse may use the deceased spouse’s unused exemption amount (the “DSUE”) under IRC § 2010(c)(5), but only if a timely Form 706 is filed. See Treas. Reg. § 20.2010-2 for the election mechanics.
• Step-up in basis: Assets included in the gross estate generally take a new income-tax basis equal to fair market value at the date of death under IRC § 1014. This is often the most valuable federal tax benefit a typical NC or SC family ever uses — and it has nothing to do with the estate tax.
• 2026 annual gift exclusion: $19,000 per recipient under IRC § 2503(b) and IRS Rev. Proc. 2025-32. Qualifying present-interest gifts within this amount generally do not consume the lifetime exclusion or require a Form 709.

Sources: Internal Revenue Code §§ 1014, 2001, 2010, 2503; Treas. Reg. § 20.2010-2; IRS Rev. Proc. 2025-32 (2026 basic exclusion and annual gift exclusion).

The 2026 Exemption — What Actually Changed

The scheduled TCJA sunset never took effect. The One Big Beautiful Bill Act (Pub. L. 119-21, enacted July 4, 2025) permanently set the federal estate and gift tax exemption at $15,000,000 per person beginning January 1, 2026, indexed for inflation in future years (IRC § 2010(c)(3)). The top rate remains 40%, and portability between spouses is unchanged.

Under prior law, the exemption was scheduled to fall to roughly $7,000,000 per person on January 1, 2026. Congress eliminated that reduction before it took effect. If your plan was built around a shrinking exemption — accelerated gifting, defensive trust layers, or formula clauses tied to the exemption amount — it deserves a fresh look under the new numbers.

What most families should review in 2026

• Beneficiary designations on retirement accounts and life insurance — these pass outside your will, and for most families they matter far more than the estate tax.
• Portability: when the first spouse dies, filing a portability-only Form 706 preserves the deceased spouse’s unused exemption — still cheap insurance even at $15 million.
• Old sunset-driven planning: gifting strategies and formula clauses designed for a shrinking exemption can now misfire — have them reviewed.
• The basics: probate avoidance, incapacity documents, and trust funding matter to every family, regardless of estate size.

North Carolina and South Carolina State Tax Rules

Neither North Carolina nor South Carolina imposes a state estate or inheritance tax in 2026. Federal estate tax can still apply, and property connected to another state may require separate review.

• North Carolina: The estate tax was repealed effective for decedents dying on or after January 1, 2013 (S.L. 2013-316, Part VII, § 7, repealing former N.C.G.S. Chapter 105, Article 1A). North Carolina also has no inheritance tax.
• South Carolina: South Carolina does not impose a state estate or inheritance tax in 2026.

For an NC or SC family with property only in those states, estate-tax exposure is generally federal. Families who own real estate or business interests elsewhere should coordinate with counsel in the other jurisdiction because state estate and inheritance-tax rules vary.

Who Actually Needs to Worry About Federal Estate Tax?

Most NC and SC households fall below the federal exclusion, but estate-tax exposure is only one part of planning. Portability, inherited retirement accounts, basis, and property in another state can still justify tax advice.

What Ryan Handles for Estates Under $10M

For the families this firm serves — estates under $10M with standard planning needs — the work is the same whether or not estate tax is on the table. The documents are designed to make administration cleaner, protect minor children, give a surviving spouse working authority, and preserve the step-up in basis at death.

Revocable Living Trust

A properly drafted revocable living trust avoids probate in NC and SC, names a successor trustee to manage assets for minor or young-adult children, and gives the surviving spouse continued access without court supervision. For couples with combined estates approaching the exemption, the trust can include a credit-shelter (bypass) sub-trust formula so the first death does not waste the deceased spouse’s exemption. See Trusts and Trust Funding. Statutory authority: N.C.G.S. § 36C-4-401 (creation of a trust); N.C.G.S. § 36C-6-602 (revocability and amendment); S.C. Code § 62-7-401; S.C. Code § 62-7-602.

Will with Portability Guidance

Even when a living trust is the centerpiece, a “pour-over” will captures any assets not retitled into the trust and names a guardian for minor children. For married couples, the will or trust documents the planning around the portability election (Form 706) at the first death, which is often the single most important federal tax step a moderate-wealth family takes. See Wills.

Durable Financial Power of Attorney

A durable financial power of attorney authorizes a named agent to manage finances during incapacity. NC’s Uniform Power of Attorney Act (N.C.G.S. Chapter 32C) and SC’s Uniform Power of Attorney Act (S.C. Code Title 62, Article 8) govern the form and scope.

Healthcare Power of Attorney and Living Will

Names a healthcare decision-maker and documents end-of-life wishes. Governed by N.C.G.S. Chapter 32A, Articles 1A and 3, and S.C. Code §§ 44-66-10 et seq. (Adult Health Care Consent Act) and §§ 44-77-10 et seq. (Death With Dignity Act).

HIPAA Authorization

Allows named individuals to receive protected health information under 45 C.F.R. § 164.508.

Trust Funding

A trust generally does not avoid probate for assets that were never transferred to it. Retitling real estate, accounts, and business interests is a separate workstream from drafting the documents. See Trust Funding for the full process.

Beneficiary Designation Review

Retirement accounts, life insurance, and transfer-on-death accounts pass outside the will or trust by contract. They still count toward the gross estate for federal estate tax purposes under IRC §§ 2039 and 2042, but the recipient is determined by the beneficiary form, not by the estate plan. We review every designation to make sure they line up with the plan and account for the SECURE Act’s 10-year payout rule for most non-spouse retirement beneficiaries (Pub. L. 116-94).

When to Bring in a Tax Specialist

Estate planning has a specialty layer. Ryan’s $10 million referral point is a firm service policy, not the federal estate-tax threshold. When a matter requires advanced transfer-tax engineering, the firm refers or co-counsels with a tax-focused attorney, often alongside a CPA and valuation professional.

• Estates over $10M, or expected to grow past that threshold within the client’s lifetime.
• Substantial closely-held business ownership requiring formal valuation work.
• Existing irrevocable trusts — including any life-insurance-funded irrevocable trust, dynasty trust, or qualified personal residence trust — that need ongoing administration or modification.
• Sophisticated lifetime gifting strategies designed to use the $15 million exemption efficiently.
• Charitable planning involving charitable remainder trusts, charitable lead trusts, or private foundations.
• Multi-state real estate or business holdings where discount valuation strategies are on the table.
• Generation-Skipping Transfer (GST) tax planning — clients leaving substantial assets to grandchildren or more remote descendants under IRC §§ 2601–2664.
• Spousal Lifetime Access Trusts (SLATs), Grantor Retained Annuity Trusts (GRATs), Intentionally Defective Grantor Trusts (IDGTs), Family Limited Partnerships, or Crummey trust planning.

For Families with Young Children Seeking Peace of Mind

This is the firm’s bread-and-butter. Most clients are working professionals in their 30s, 40s, and 50s with one or two young or teenage children, a house, retirement accounts, maybe a term life policy, and an estate well under any exemption that has ever existed. They are not worried about estate tax. They are worried about what happens to their kids if both parents die in a car accident next month.

For these families, the revocable living trust does work that has nothing to do with tax planning:

• Avoids probate in NC (N.C.G.S. Chapter 28A) and SC (S.C. Code Title 62, Article 3), keeping the family’s affairs private and reducing administrative cost and delay.
• Names a successor trustee to manage assets for minor or young-adult children without court supervision — usually a relative or trusted friend, sometimes a corporate trustee for larger estates.
• Allows graduated distributions: a common pattern is one-third at age 25, one-third at 30, and the remainder at 35, with the trustee retaining discretion to support health, education, maintenance, and support before those ages.
• Maintains privacy: unlike a probated will, a trust agreement is not filed with the clerk of court.
• Provides immediate authority if a parent becomes incapacitated, without a guardianship or conservatorship proceeding.

Statutory authority for revocable living trusts: N.C.G.S. § 36C-4-401 (methods of creating a trust); N.C.G.S. § 36C-6-602 (presumption of revocability); S.C. Code § 62-7-401; S.C. Code § 62-7-602. Guardianship of minor children is governed by N.C.G.S. Chapter 35A (NC) and S.C. Code Title 62, Article 5 (SC); the will is the document that nominates a guardian.

Realistic Action Items

• Most NC and SC families (under $15M): get a will or revocable living trust, durable financial POA, healthcare POA, living will, and HIPAA authorization. Review every three to five years or after a major life event. Federal estate tax is unlikely at this level, but portability, basis, inherited retirement accounts, and out-of-state property can still require tax advice.
• Estates approaching the exemption ($10M+): review portability election strategy. If a spouse has already died, confirm whether Form 706 was filed for the DSUE; if not, evaluate the late-election relief under Rev. Proc. 2022-32. Talk to a CPA and either a tax-focused attorney or this firm working in coordination with one.
• Over $10M: schedule with a tax specialist. This firm can draft the core wills, healthcare directives, and trust documents in coordination with that specialist, but the transfer-tax engineering needs to live with someone who does it every day.

See also: Probate Avoidance, Trusts, Wills, Trust Funding, About Attorney Ryan Duffy.

Frequently Asked Questions