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Aug 02, 2026
Most Louisiana families do not need to be afraid of estate taxes.
Beginning in 2026, the federal estate-and-gift-tax exclusion is $15 million per individual. That means a federal estate-tax return generally is not required unless the decedent’s gross estate, adjusted taxable gifts, and certain prior gifts exceed the applicable filing threshold.
The new law removed the previously scheduled expiration of the increased exemption. In that sense, the $15 million base is “permanent,” although Congress can always change federal tax law in the future. The amount is also scheduled to be adjusted for inflation after 2026.
The IRS estate-tax filing-threshold table confirms the $15 million figure for people who die in 2026. Public Law 119-21 increased the base exemption to $15 million for deaths and gifts occurring after December 31, 2025.
For married couples, proper planning and the federal portability election may preserve as much as $30 million of combined exemption in 2026. That result is not necessarily automatic. Preserving a deceased spouse’s unused exemption generally requires a timely federal estate-tax return, even when the first spouse’s estate would not otherwise owe estate tax.
Louisiana Does Not Currently Impose Its Own Estate or Inheritance Tax
Louisiana does not currently impose a separate inheritance tax, and no Louisiana estate transfer tax is due for current deaths under the existing federal credit structure.
The Louisiana Department of Revenue explains that the state inheritance tax was repealed and that no Louisiana estate transfer tax has been due for deaths occurring after December 31, 2004.
Louisiana’s state gift tax was also repealed for gifts made after July 1, 2008, according to the Louisiana Department of Revenue’s gift-tax repeal guidance.
Federal gift-tax rules still apply, however. The federal gift-tax annual exclusion is $19,000 per recipient in 2026. Gifts exceeding the annual exclusion do not necessarily create an immediate tax bill, but they may require a federal gift-tax return and use part of the donor’s lifetime estate-and-gift-tax exclusion. The IRS gift-tax guidance explains both the annual and lifetime exclusions.
For the overwhelming majority of Louisiana families, federal estate tax will therefore not be the principal tax concern in their estate plan.
The more common—and often overlooked—issue is capital gains.
The “Hidden Estate Tax” Is Usually Capital Gains
Capital-gains tax is not technically an estate tax. It generally arises only when appreciated property is sold.
However, capital gains can function like a hidden tax on a family’s inheritance when property is transferred without considering its income-tax basis.
Your basis is generally the amount used to determine gain or loss when property is sold. It often begins with what you paid for the asset and is later adjusted for improvements, depreciation, and other events.
For example, suppose you purchased a parcel of land for $100,000 and it is now worth $500,000. Ignoring other possible adjustments, your unrealized gain is $400,000.
What happens to that $400,000 gain can depend heavily on whether you give the property away during your life or retain it as part of your estate.
Lifetime Gifts Usually Carry the Donor’s Basis
Giving appreciated property to a child or another loved one during your lifetime generally does not give the recipient a new basis equal to the property’s current value.
Instead, the recipient generally receives the donor’s adjusted basis for purposes of calculating a later gain. This is commonly called carryover basis.
In the example above, if you give the $500,000 property to your child while your basis is $100,000, your child will generally take your $100,000 basis. If the child later sells the property for $500,000, the child may recognize approximately $400,000 of gain.
The IRS Basis of Assets guide confirms that when the fair market value of gifted property is equal to or greater than the donor’s adjusted basis, the recipient generally receives the donor’s basis, subject to applicable adjustments.
This rule applies even if:
- The gift is below the federal annual gift-tax exclusion
- No federal gift tax is owed
- No Louisiana gift tax applies
- No federal gift-tax return is required
- The donor intended to simplify the eventual succession
- The property is transferred to a family member for no payment
The absence of gift tax does not create a basis adjustment.
That is why donating—or more accurately, gifting—highly appreciated property to loved ones before death can produce an unintended capital-gains problem. A deed that appears to simplify the estate may cause the family to lose a substantial tax benefit.
Lifetime gifts can still make sense for personal, business, Medicaid, asset-protection, or advanced tax-planning reasons. The point is not that appreciated property should never be given away. It is that the potential loss of the basis adjustment should be evaluated before the transfer is made.
Inherited Property Generally Receives a New Basis
Property acquired from a decedent generally receives a basis equal to its fair market value on the date of death. This is commonly known as a step-up in basis, although it is technically a basis adjustment because the basis can also move downward if the property has declined in value.
Returning to the example, suppose you retain the property until death and your child inherits it when it is worth $500,000. The child’s basis will generally become $500,000.
If the child sells it shortly afterward for approximately $500,000, there may be little or no capital gain attributable to the appreciation that occurred during your lifetime.
The IRS confirms that the basis of inherited property is generally its fair market value at the owner’s date of death in its guidance on gifts and inheritances.
For a family whose estate is far below the $15 million federal estate-tax exclusion, retaining appreciated property until death may therefore produce two results:
- No federal estate tax because the estate is below the exclusion
- A new income-tax basis that may reduce future capital gains
That combination is why basis planning is often far more important than estate-tax planning for ordinary Louisiana estates.
Not every inherited asset receives this treatment. Traditional retirement accounts, accrued income, and other items classified as income in respect of a decedent may be governed by different rules. Families should have a CPA or other tax professional identify which assets qualify.
A Will Can Preserve the Basis Adjustment—but It Does Not Create It
Property passing through a properly prepared Louisiana last will and testament will generally remain owned by the decedent until death. If the property qualifies under federal law, the beneficiary ordinarily receives the date-of-death basis adjustment.
The will itself does not create the tax benefit. The important fact is that the owner retained the property until death and the property passed from the decedent.
This distinction matters. Adding a child to a deed during life or donating the property outright may change ownership immediately and cause the child to receive carryover basis. Leaving the same property to the child through a will may preserve the date-of-death adjustment.
The tax benefit should be considered alongside succession costs, control, creditor exposure, family relationships, and the owner’s future financial needs.
A Properly Structured Revocable Grantor Trust Can Also Preserve It
A properly structured and funded revocable living trust can allow property to pass outside a court succession while ordinarily preserving the basis adjustment.
During the settlor’s lifetime, the trust is generally treated as a grantor trust for income-tax purposes. More importantly for basis planning, the settlor typically retains the power to revoke the trust and the trust assets remain included in the settlor’s federal gross estate.
That estate inclusion is what ordinarily preserves the basis adjustment—not merely the label “grantor trust.”
This type of planning can allow a family to combine:
- Continued control during the settlor’s lifetime
- Management during incapacity
- Avoidance of a Louisiana succession for properly funded assets
- A date-of-death basis adjustment for qualifying property
Our article on wills and trusts in Louisiana explains some of the practical differences between these estate-planning tools.
Not Every Grantor Trust Receives a Step-Up
“Grantor trust” is primarily an income-tax classification. It means the person who established the trust is treated as the owner of some or all of its assets for income-tax purposes.
It does not necessarily mean the assets will be included in that person’s federal gross estate.
An irrevocable trust can be a grantor trust for income-tax purposes while being outside the grantor’s estate for estate-tax purposes. In that situation, the assets may not receive a date-of-death basis adjustment.
The IRS addressed this issue directly in Revenue Ruling 2023-2. The ruling explains that assets in an irrevocable grantor trust did not receive a Section 1014 basis adjustment when the transfer was a completed gift and the assets were not included in the grantor’s gross estate.
The correct planning principle is therefore:
A grantor trust does not receive a step-up merely because it is a grantor trust. The trust must also be structured so that its assets qualify as property acquired from the decedent or remain included in the grantor’s federal gross estate.
This distinction should be reviewed carefully before transferring appreciated real estate, business interests, or investment assets to an irrevocable trust.
Louisiana Community Property Can Receive an Especially Valuable Adjustment
Louisiana’s community-property system can make the basis adjustment even more valuable for married couples.
When one spouse dies, the basis of qualifying community property—including the surviving spouse’s one-half interest—generally adjusts to the property’s total fair market value if at least one-half of the community interest is included in the deceased spouse’s gross estate.
The IRS Basis of Assets publication specifically identifies Louisiana as a community-property state and explains this treatment.
For example, assume spouses own community property with a combined basis of $200,000 and a fair market value of $600,000 when one spouse dies. If the federal requirements are satisfied, the basis of the entire community asset may generally adjust to $600,000—not merely the deceased spouse’s one-half interest.
This potentially valuable result depends on whether the property is truly community property and how it is owned and structured. Separate property, jointly owned property that is not community property, and property transferred through certain trusts may receive different treatment.
Proper documentation of the property’s character and its date-of-death value is essential.
Keep Evidence of the Date-of-Death Value
The basis adjustment is only useful if the family can establish the property’s fair market value at death.
Even when no federal estate-tax return is required, families should consider obtaining and preserving appropriate valuation records for:
- Real estate
- Closely held businesses
- Privately held company interests
- Mineral interests
- Valuable collections
- Investment accounts
- Other substantially appreciated property
Years later, a beneficiary may have difficulty proving the correct basis if no appraisal or valuation was obtained when the owner died.
The succession representative or trustee should work with the family’s attorney, CPA, appraiser, and financial adviser to create reliable records.
Do Not Let Tax Fear Drive the Wrong Estate Plan
Taxes matter, but they should not be considered in isolation.
Giving property away simply because someone is afraid of estate tax may create a larger capital-gains problem, reduce the donor’s financial security, expose the property to the recipient’s creditors, or place control in the wrong hands.
For most Louisiana families, a practical tax review should ask:
- Is the estate realistically large enough to face federal estate tax?
- Is the property highly appreciated?
- What is the owner’s current adjusted basis?
- Would a lifetime gift create carryover basis?
- Would retaining the property preserve a date-of-death adjustment?
- Is the property community or separate?
- Would a revocable trust avoid succession while preserving estate inclusion?
- Would an irrevocable trust sacrifice the basis adjustment?
- Are there nontax reasons to transfer the property now?
- Has a CPA reviewed the projected income-tax consequences?
Estate planning should coordinate the legal plan with the client’s financial and tax advice. A transfer that succeeds for one purpose may create an unnecessary problem somewhere else.
Field Law Can Help Coordinate Your Louisiana Estate Plan
Field Law helps Louisiana families structure wills and trusts with ownership, succession, and basis consequences in mind.
We do not prepare income-tax returns or replace individualized advice from a CPA. We can work with your tax and financial professionals to determine whether appreciated property should pass through a will, a revocable grantor trust, or another carefully selected arrangement.
Before donating real estate, business interests, or investments to a loved one, it is worth reviewing the potential loss of the date-of-death basis adjustment.
To discuss how ownership and tax basis fit into your Louisiana estate plan, contact Field Law to schedule a consultation.
