Estate Tax Attorney in Chattanooga, TN

How the Federal Estate Tax Works in Tennessee

Tennessee does not impose its own estate or inheritance tax. The state repealed its inheritance tax in 2016 and does not have a separate state-level estate tax today. For Tennessee residents, estate tax exposure is entirely federal. That removes one layer of taxation, but it does not eliminate the problem. At higher asset levels, the federal estate tax becomes one of the largest financial risks a family will ever face.

The federal estate tax applies to the total value of everything you own at death. That includes real estate, business interests, investment accounts, retirement assets, life insurance proceeds, and personal property. After applying the available exemption, remaining dollars are taxed at a 40% rate. To be clear, this is not a tax on income or capital gains, rather it is a tax on the transfer of wealth to the next generation. For families who have spent decades building a business, acquiring real estate, or investing consistently, the result can be a substantial portion of that wealth being transferred to the federal government instead of to their children or grandchildren.

As of 2026, the federal estate tax exemption is $15 million per person. With proper planning and portability elections, married couples can protect up to $30 million. Those numbers sound high, but many Chattanooga families are closer to this threshold than they realize, particularly when business valuations, real estate appreciation, and life insurance are fully accounted for. Once an estate exceeds the exemption, the 40% tax applies immediately to the overage.

The tax is due within nine months of death. It must be paid in cash, regardless of how the estate is structured. If the estate is tied up in a closely held business, real estate holdings, or other illiquid assets, families are often forced into difficult decisions, including selling assets under pressure or taking on debt, simply to satisfy the tax obligation.

Who Needs an Estate Tax Attorney in Chattanooga?

Estate tax planning is not necessary for every family. But for certain individuals and families in the Chattanooga area, it becomes one of the most important financial decisions they will make. The profiles below reflect the clients who benefit most from proactive planning.

Business owners with closely held companies

A closely held business often represents the largest portion of a family’s wealth, but it is also one of the least liquid assets. Without coordinated planning, estate taxes can force a sale, a rushed transition, or internal conflict among successors. Business succession and estate tax strategy must be designed together to avoid those outcomes.

Real estate investors and developers

Large real estate portfolios create a combination of estate tax exposure and embedded capital gains issues. Without proper structuring, the same assets that built wealth can create significant tax pressure on the next generation, particularly when liquidity is limited.

Healthcare professionals and practice owners

Physicians, dentists, and other healthcare professionals in Chattanooga and nearby markets often build substantial net worth through a combination of personal assets and practice value. Both components need to be addressed in a coordinated estate tax plan.

Families with rapidly appreciating assets

Appreciation changes the equation. Real estate along the Chattanooga corridor, equity in growing businesses, and long-term investment portfolios can push an estate into taxable territory faster than expected, even when current values appear comfortably below the exemption.

Families planning around uncertainty in future law

The current exemption is favorable, but it is not guaranteed. Families who want to preserve flexibility and lock in planning advantages while the rules are favorable benefit from acting before those rules change.

Estate Tax Planning Strategies Available to Chattanooga Families

Estate tax planning is not built around a single technique. It is built by combining strategies that address three core issues:

• Reducing the size of the taxable estate
• Managing how assets transfer to the next generation
• Creating liquidity to pay any tax that remains

Scott Grant works with Chattanooga clients to design plans that address all three, using the following tools where appropriate.

Strategies That Reduce the Taxable Estate

Spousal Lifetime Access Trusts (SLATs)

A SLAT allows one spouse to transfer assets out of their taxable estate while still preserving indirect access through the other spouse. Future appreciation occurs outside the estate, which is where much of the tax savings is created.

For married couples near or above the exemption threshold, this is one of the most practical ways to reduce estate size without giving up flexibility.

Intentionally Defective Grantor Trusts (IDGTs)

An IDGT is designed to move appreciating assets out of the estate while allowing the grantor to continue paying the income tax on those assets. That tax payment further reduces the estate over time without additional gift tax.

In practice, this is often used with business interests or other high-growth assets, allowing future appreciation to pass to heirs outside the estate.

Annual Gifting Strategies

The annual gift tax exclusion allows assets to be transferred each year without using lifetime exemption. Over time, consistent gifting can remove substantial value from the estate, particularly for families with multiple beneficiaries.

Strategies That Solve the Liquidity Problem

Irrevocable Life Insurance Trusts (ILITs)

An ILIT removes life insurance from the taxable estate and creates a dedicated source of liquidity at death.

This allows estate taxes to be paid without forcing the sale of a business, real estate, or other core assets. For families with illiquid estates, this is often one of the most important planning tools.

Strategies That Improve Tax Efficiency

Tennessee Community Property Trusts

Tennessee allows married couples to elect community property treatment for certain assets. The primary benefit is a full step-up in basis at the first spouse’s death.

For families holding appreciated real estate, business interests, or long-term investments, this can eliminate significant capital gains tax exposure for the surviving spouse or heirs.

Strategies That Incorporate Charitable Goals

Charitable Remainder and Lead Trusts

These structures allow families to combine tax planning with philanthropy.

A Charitable Remainder Trust provides income to the family first, with the remainder going to charity. A Charitable Lead Trust does the reverse, allowing assets to pass to heirs at a reduced transfer tax cost after supporting charitable causes.