Federal Estate Tax Exemption 2026: $15M Per Person, No Sunset

What was the "estate tax exemption sunset"?

Under the Tax Cuts and Jobs Act of 2017 (TCJA), the federal estate and gift tax exemption was doubled from roughly $5.5M to $11.2M per person. That higher exemption was always scheduled to expire at the end of 2025, reverting to the pre-TCJA amount (adjusted for inflation — estimated ~$7M per person). This scheduled reduction was widely called the "estate tax exemption sunset."

From 2018 through 2025, HNW families raced to use that elevated exemption before it disappeared — using SLATs, GRATs, and outright gifts to shift assets out of the taxable estate while the high-exemption window was open.

OBBBA: The sunset was eliminated

The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently extended and increased the estate and gift tax exemption. Key provisions:¹

• $15,000,000 per individual basic exclusion amount for 2026 (up from $13.99M in 2025)
• $30,000,000 per married couple (with portability election)
• Indexed for inflation annually starting 2027 — the exemption will continue to grow each year
• The unified gift/estate/GST exemption is permanent — no scheduled reduction
• GST (generation-skipping transfer) exemption also set at $15M per person¹

The top estate tax rate remains 40% on amounts above the exemption.²

Who's affected by the estate tax in 2026?

With a $15M individual exemption, far fewer estates face federal tax than before TCJA. A rough breakdown:

Why estate planning still matters — even at $15M

The permanent $15M exemption doesn't mean estate planning is off the table. Three major exposures remain:

1. State estate tax — exemptions as low as $1M

Twelve states and Washington D.C. impose their own estate tax, independent of the federal exemption. If you live in Massachusetts, Oregon, or Washington State, your estate may owe state tax even with a $10M net worth — well below the $15M federal threshold. Key 2026 state exposures:³

• Massachusetts: $2M exemption, top rate 16%
• Oregon: $1M exemption, top rate 16%
• Washington State: $2.193M exemption, top rate 20%
• New York: $7.16M exemption, but the "NY cliff" — if your estate exceeds the exemption by more than 5%, the entire estate is taxable (not just the excess)
• Maryland: $5M exemption, plus a separate inheritance tax

See the full 2026 state estate tax guide for all 13 jurisdictions.

2. Growth: the exemption protects what you own today, not what you'll own later

The $15M exemption covers today's asset value. If a $10M real estate portfolio or private business grows to $20M over the next decade, you've moved from well-below-exemption to above it. The best time to plan is before growth occurs:

• GRAT (Grantor Retained Annuity Trust): Transfer expected appreciation out of your estate. If the asset grows faster than the IRS §7520 hurdle rate (currently 4.6%), the excess transfers gift-tax free. Zeroed-out GRATs use essentially none of your $15M exemption.
• SLAT (Spousal Lifetime Access Trust): Remove assets from your taxable estate while retaining indirect access via your spouse. Useful when you have a significant appreciated asset that you expect to grow further.
• Dynasty Trust: Assets inside the trust are sheltered from estate and GST tax at each generation's death. Funded now with pre-appreciation assets, the trust benefits from compound growth free of estate tax for 100+ years in favorable states (SD, NV, DE, WY).

3. Estates already over $30M (married) or $15M (single)

If your estate already exceeds the applicable exemption, the calculus is straightforward: every dollar above $15M faces 40% tax at death. Advanced strategies remain essential:

• IDGT installment sale: Sell assets to an Intentionally Defective Grantor Trust for a promissory note. No capital gains on the sale (grantor trust rules), interest payments run at the §7520 rate. Assets outside estate; future growth accrues to the trust beneficiaries.
• Annual exclusion gifting: $19,000 per donee per year ($38,000/year per couple) with zero gift tax and no exemption use. For families with multiple children and grandchildren, annual gifting removes significant wealth over time.
• Charitable Remainder Trust (CRT): Converts a highly appreciated asset into an income stream, bypasses capital gains at contribution, and provides an estate tax deduction for the charitable remainder value. See the CRT guide and calculator.

The annual exclusion: always valid regardless of exemption level

The annual gift tax exclusion — separate from the lifetime exemption — allows each donor to give $19,000 per donee per year in 2026 ($38,000/year per couple) without using any lifetime exemption or filing a gift tax return.¹

For a family with two parents, three adult children, and three spouses-of-children, the annual exclusion gifting capacity is:

• 2 donors × $19,000 × 8 donees = $304,000/year out of the estate — tax-free, no exemption consumed

Over 20 years with 5% investment growth inside the estate, that sustained gifting removes roughly $10–12M of wealth. Use the annual gift calculator to model your specific numbers.

529 superfunding: Each donor can front-load 5 years of annual exclusion into a 529 account — $95,000 per beneficiary (or $190,000 per couple). This removes $95,000–$190,000 per grandchild from the estate immediately, with no gift tax and no exemption used.

What OBBBA changed vs. what stayed the same

Portability: protecting the surviving spouse

Portability allows a surviving spouse to inherit any unused estate tax exemption from their deceased spouse (the DSUE — Deceased Spousal Unused Exclusion). With a $15M per-person exemption and portability, married couples effectively have a $30M combined shield.

Critical rules that didn't change under OBBBA:

• Portability must be elected on a timely Form 706 (federal estate tax return), even if no tax is owed — the 9-month deadline applies, with a 6-month extension available on Form 4768.
• Late portability elections are permitted up to 5 years after death under Rev. Proc. 2022-32 (simplified procedure), if no Form 706 was filed.
• DSUE is not inflation-indexed — the exemption you inherit is locked at the amount your spouse had unused, not the current year's higher amount.
• GST exemption is not portable — GST planning requires both spouses to actively use their exemptions while alive.

See the detailed portability election and DSUE guide.

When to act: planning priorities for 2026

If your estate is under $15M (single) or $30M (married)

You have no immediate federal estate tax exposure. But consider:

1. Check your state. Twelve jurisdictions tax estates at much lower thresholds. If you're in Massachusetts, Oregon, or Washington, state estate tax planning is meaningful even at $5M–$10M.
2. Review beneficiary designations. IRAs, 401(k)s, and life insurance pass outside your will. Wrong beneficiary designations are one of the most common — and costly — estate planning mistakes.
3. Fund existing trusts. Revocable living trusts are common. But an unfunded trust (the trustor never transferred assets into the trust) doesn't avoid probate and doesn't protect your estate. Review and re-title assets.
4. Start annual gifting. Even below the federal threshold, removing $200K–$300K/year from a growing estate has compounding benefits.
5. Portability election if widowed. If your spouse has recently died and no Form 706 was filed, the 5-year late-election window under Rev. Proc. 2022-32 may be open.

If your estate is over $30M

1. GRAT while §7520 rates are relatively favorable. A lower hurdle rate means the GRAT is easier to beat. The April 2026 §7520 rate is 4.6% — still in moderate territory.
2. SLAT for long-lived assets. Move an illiquid or pre-appreciation asset outside the estate while the exemption is high and the growth clock starts early.
3. Dynasty Trust for multi-generational wealth. The $15M GST exemption is now permanent, but GST is still owed above the exemption. Fund the dynasty trust now with pre-appreciation assets to maximize the shelter.
4. IDGT installment sale for business equity. If you own closely-held business equity expected to grow significantly, selling to an IDGT at current fair market value freezes the estate at today's value and shifts future appreciation to trust beneficiaries.
5. Annual gifting as a baseline. Even with advanced trust strategies in place, annual exclusion gifts reduce the estate every year without any exemption cost.

Working with a fee-only estate planning advisor

The change from "race to use the exemption before sunset" to "plan with a permanent $15M" doesn't eliminate complexity — it shifts where the complexity is. State estate tax, trust structure selection, GST planning, IRA beneficiary sequencing, and business succession still require coordinated advice from a financial advisor who works alongside your trust-and-estates attorney.

Fee-only advisors — who don't earn product commissions — are better positioned to give objective guidance on whether a complex trust structure actually makes sense for your situation.

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