For years, wealthy families operated under a countdown clock. The TCJA doubled the estate and gift tax exemption starting in 2018, but included a built-in sunset that would have cut the exemption roughly in half after December 31, 2025. The One Big Beautiful Bill Act eliminated that sunset and raised the exemption to $15 million per person, effective 2026.
What Are the 2026 Estate Tax Numbers?
The unified credit shelters a fixed dollar amount of lifetime transfers from federal tax. For 2026, that amount is $15,000,000 per person.
Key figures for 2026:
- Lifetime exemption (individual): $15,000,000
- Lifetime exemption (married couple with portability): $30,000,000
- Federal estate tax rate: 40% on amounts above the exemption
- Annual gift tax exclusion: $19,000 per recipient ($38,000 for couples splitting gifts)
- GST tax exemption: $15,000,000 (not portable between spouses)
- Inflation indexing: Annual CPI adjustments beginning 2027
The annual gift exclusion is separate from the lifetime exemption. A couple with three children and six grandchildren can transfer $342,000 per year ($19,000 x 9 recipients x 2 spouses) without using any of their $30 million combined exemption.
What Did the OBBBA Change?
The TCJA set the exemption at roughly $13,990,000 per person for 2025, with a scheduled drop to approximately $7 million on January 1, 2026. The OBBBA made three changes:
- Eliminated the December 31, 2025 sunset permanently
- Raised the base exemption to $15,000,000 for 2026
- Preserved the anti-clawback rule protecting gifts made during 2018-2025
The 40% tax rate and inflation indexing mechanism were unchanged.
Who Still Pays Federal Estate Tax?
With a $15 million exemption, federal estate tax affects fewer than 0.1% of decedents. That said, the tax applies to:
- Individuals with taxable estates above $15,000,000
- Married couples with combined estates above $30,000,000, assuming both exemptions are used via portability
- Owners of illiquid assets such as real estate or closely held businesses, where valuation complexity can push taxable estate values higher than expected
- Non-citizen surviving spouses, who cannot use the standard marital deduction without a Qualified Domestic Trust (QDOT)
Portability allows a surviving spouse to claim the deceased spouse's unused exemption (DSUE) by filing Form 706 within nine months of death (plus a six-month extension). Filing is required even when no estate tax is owed. Skipping it forfeits the DSUE permanently.
What Are the Key Planning Strategies for 2026?
The higher permanent exemption reduces urgency for many families, but creates new opportunities for those in the $15 to $30 million range.
Spousal Lifetime Access Trust (SLAT): One spouse funds an irrevocable trust for the other using their gift tax exemption. Assets leave the taxable estate, but the beneficiary spouse retains access through distributions. Both spouses can create SLATs, provided the trusts differ materially to avoid the reciprocal trust doctrine.
Grantor Retained Annuity Trust (GRAT): The grantor transfers appreciating assets into a trust and receives annuity payments for a fixed term. If the assets outperform the IRS Section 7520 hurdle rate, the excess growth passes to beneficiaries estate-tax-free. Short two-year rolling GRATs minimize mortality risk.
Annual exclusion gifting: Systematic use of the $19,000 annual exclusion removes wealth from the estate without touching the lifetime exemption. A couple with four children and eight grandchildren can transfer $456,000 per year. Over a decade, that is $4.56 million plus growth, outside the taxable estate entirely.
529 plan front-loading: Up to $95,000 per beneficiary ($19,000 x 5 years) can be contributed in a single year under the five-year election with no gift tax consequences.
Do State Estate Taxes Still Apply?
Yes. The federal exemption increase does not affect state-level estate or inheritance taxes. Twelve states and the District of Columbia impose their own taxes, often with much lower thresholds:
- Massachusetts and Oregon: $1,000,000 exemption
- New York: $7,160,000, with a cliff provision: if the estate exceeds 105% of the exemption, the full estate becomes taxable, not just the excess
- Washington: $2,193,000 exemption, 20% top rate (highest in the nation)
- Texas: No state estate tax and no inheritance tax
For residents of high-tax states, state-level planning often delivers more savings per dollar than federal planning at these exemption levels.
For questions about how the $15 million exemption affects your estate plan, contact TS CPA for a free consultation.