EstateFlow calculates federal and state estate tax liability separately, then combines the results so you can see the full tax picture.
Quick Summary
EstateFlow tracks federal exemption and state exemption as two distinct amounts.
It applies state tax rules first (when a taxable state is selected), then applies federal tax rules.
State tax can reduce federal taxable estate through a state death tax deduction.
Federal and state thresholds are not interchangeable—federal law dictates the calculation of federal estate tax liability and state law dictates the calculation of state estate tax liability.
How threshold exemption usage is tracked during distributions
As EstateFlow models transfers to beneficiaries, it tracks remaining exemption at both levels:
Federal exemption remaining
State exemption remaining
For taxable transfers (generally non-spouse, non-charity beneficiaries), EstateFlow reduces both balances as applicable.
EstateFlow does not reduce exemption for transfers that are typically exempt in estate-tax modeling (such as certain spouse or charity transfers).
How EstateFlow calculates taxes
EstateFlow runs tax calculations in this order:
State estate tax calculation
Federal estate tax calculation, using the state tax deduction where applicable
Combined total (state + federal)
If no state-level estate tax applies, EstateFlow calculates federal tax only.
Federal threshold logic
Federal exclusion is determined using federal exemption data tied to date-of-death assumptions, plus inputs entered in Client Settings including:
Prior exemption usage,
Portability/DSUE assumptions
State threshold logic
State exclusion and tax formulas depend on the selected state assumptions
Each state calculation follows the applicable state law: some states use straightforward bracket math; others use special rules (for example, New York’s “cliff” behavior)
That means two estates with similar values can produce different state tax outcomes depending on the state