Estate Taxes in Missouri: What St. Louis Families Need to Know About Federal and State Tax Rules

Estate Taxes in Missouri: What St. Louis Families Need to Know About Federal and State Tax Rules

One of the most common concerns people have when they start thinking about estate planning is taxes. "Will my family have to pay estate taxes?" "How much of my estate will the government take?" These are fair questions, and the answers depend on a combination of federal law and Missouri state law.

At The Taormina Firm, we help families throughout the St. Louis area — from Clayton and Brentwood to Chesterfield and St. Charles — understand how estate taxes work and develop strategies to minimize their impact. Here's what you need to know.

The Good News: Missouri Does Not Have a State Estate Tax

Unlike some states that impose their own estate or inheritance tax, Missouri does not have a separate state estate tax. This is a significant advantage for Missouri residents. Some neighboring states and states across the country have estate tax thresholds as low as $1 million, meaning even modest estates can be subject to state-level taxation. In Missouri, that's not a concern.

Missouri also does not impose an inheritance tax, which is a tax paid by the person receiving an inheritance. So if you inherit assets from a loved one who lived in Missouri, you won't owe state taxes on what you receive.

Federal Estate Tax: The Basics

While Missouri doesn't have its own estate tax, the federal estate tax still applies to estates above a certain threshold. Under current federal law, the estate tax exemption is $13.99 million per individual (as of 2025). Married couples can effectively double that to nearly $28 million using a concept called portability.

What this means in practical terms: if the total value of your estate (including your home, investments, life insurance, retirement accounts, and other assets) is under the exemption amount, your estate will not owe any federal estate tax. For the vast majority of families in Missouri, this means federal estate tax is not a concern.

But Wait — The Exemption May Change

Here's the critical detail that many people miss: the current high exemption amount is set to sunset at the end of 2025 under the Tax Cuts and Jobs Act of 2017. Unless Congress acts to extend it, the exemption could drop back to approximately $6–7 million per person (adjusted for inflation) starting in 2026. That change would bring many more estates into the taxable range.

If your estate is worth more than $6–7 million — or if it could grow to that level — now is the time to plan. Strategies like irrevocable life insurance trusts (ILITs), gifting strategies, and charitable remainder trusts can help reduce the taxable value of your estate before any potential exemption decrease takes effect.

The Federal Gift Tax and Annual Exclusion

The federal estate tax and gift tax are connected. During your lifetime, you can give away up to the estate tax exemption amount without owing gift tax. But there's also an annual gift tax exclusion — currently $18,000 per recipient per year (as of 2024) — that allows you to make tax-free gifts without using any of your lifetime exemption.

For families in communities like Wildwood, Des Peres, and Sunset Hills with significant assets, a strategic gifting plan can be a powerful way to reduce the size of your taxable estate while putting money in your children's or grandchildren's hands now.

Income Tax Considerations: The Step-Up in Basis

Even if your estate isn't large enough to trigger estate taxes, there are important income tax considerations to keep in mind. One of the most valuable is the step-up in basis.

When you pass away, your heirs receive your assets at their current fair market value — not the price you originally paid. This "stepped-up" basis means that if your heirs sell the assets, they'll only owe capital gains tax on any appreciation that occurs after your death, not on the gains that accumulated during your lifetime.

This is a huge benefit, particularly for families who own appreciated real estate or investment portfolios. Proper estate planning ensures your family can take full advantage of this tax benefit.

Estate Tax Planning Strategies for Missouri Families

Even if estate taxes aren't an immediate concern for your family, there are several planning strategies worth considering. Using a revocable living trust to avoid probate (which has its own costs) is the foundation of most estate plans. For larger estates, an irrevocable life insurance trust can remove life insurance proceeds from your taxable estate. Annual gifting allows you to transfer wealth to the next generation tax-free over time. Charitable giving strategies can reduce the size of your taxable estate while supporting causes you care about. And for married couples, proper use of portability elections and credit shelter trusts can maximize the combined exemption.

Work with an Attorney Who Understands Missouri and Federal Tax Law

Estate tax planning sits at the intersection of estate law and tax law — and getting it right requires someone who understands both. At The Taormina Firm, we stay current on both Missouri law and federal tax changes to help our clients make informed decisions.

If you're in the St. Louis area — from Maryland Heights to Florissant, University City to Crestwood — and want to make sure your estate plan accounts for tax considerations, schedule a consultation with us today. We'll help you protect more of what you've worked so hard to build.