The estate and gift tax exemption was the single most uncertain number in tax planning for the past five years. Under the TCJA, the exemption was scheduled to drop from approximately $13.6 million per person back to roughly $7 million on January 1, 2026. Wealthy families spent years accelerating gifts, funding irrevocable trusts, and restructuring ownership — all to beat a sunset that never arrived. The One Big Beautiful Bill Act eliminated the sunset entirely and raised the exemption to $15 million per person ($30 million for married couples), indexed for inflation going forward.
What Are the 2026 Estate and Gift Tax Exemption Numbers?
The unified credit against estate and gift taxes shelters a fixed dollar amount of lifetime transfers from federal taxation. For 2026, the exemption is $15,000,000 per individual. A married couple can transfer up to $30,000,000 — during life or at death — without triggering the 40% federal estate tax.
2026 Federal Estate & Gift Tax Exemption
Key Numbers- Lifetime exemption per individual: $15,000,000
- Lifetime exemption per married couple: $30,000,000 (with portability)
- Federal estate tax rate: 40% on amounts exceeding the exemption
- Annual gift tax exclusion: $19,000 per recipient ($38,000 for married couples splitting gifts)
- GST tax exemption: $15,000,000 (mirrors the estate tax exemption)
- Inflation indexing: Annual CPI adjustment beginning 2027
The annual gift tax exclusion ($19,000 for 2026) is separate from the lifetime exemption. You can gift $19,000 per recipient per year without using any of your $15 million lifetime exemption. A couple with three children and six grandchildren can transfer $342,000 annually ($19,000 × 9 recipients × 2 spouses) without filing a gift tax return or reducing their combined $30 million exemption.
How Does Portability Work Between Spouses?
Portability under IRC § 2010(c)(4) allows a surviving spouse to use the deceased spouse's unused exemption (DSUE). If the first spouse dies with a $15 million exemption and uses only $3 million, the surviving spouse can elect portability on a timely filed Form 706 and carry forward the remaining $12 million. Combined with their own $15 million exemption, the survivor holds $27 million in sheltered capacity.
Portability Requirements
Form 706To claim portability, the executor must:
- File Form 706 (U.S. Estate Tax Return) within 9 months of death (plus 6-month extension)
- Elect portability on the return, even if no estate tax is owed
- The surviving spouse must be a U.S. citizen (or transfers must pass through a Qualified Domestic Trust)
Common mistake: Families below the exemption threshold skip Form 706 because no tax is due. This forfeits the DSUE amount permanently. At $15 million per person, even moderately wealthy families should consider filing.
Portability does not apply to the GST tax exemption. To shelter assets from generation-skipping transfer taxes, the deceased spouse's GST exemption must be allocated to trusts during life or at death through the Form 706 allocation process. This is a planning gap that affects families using trusts for grandchildren or dynasty planning.
What Changed Under the OBBBA Compared to the TCJA?
The TCJA doubled the estate tax exemption beginning in 2018 but included a sunset provision that would have cut it roughly in half after December 31, 2025. The OBBBA made three changes:
The anti-clawback rule is particularly significant. Families who made large gifts between 2018 and 2025 — using the temporarily elevated exemption — are not penalized when they die after the law changed. If you gifted $12 million in 2024 under the TCJA exemption, and the exemption is now $15 million, your estate still gets credit for the full $12 million gift. The OBBBA did not modify this protection.
Who Is Still Subject to Estate Tax After the OBBBA?
With a $15 million per-person exemption, the federal estate tax affects fewer than 0.1% of decedents. However, the tax is concentrated:
- Individuals with estates exceeding $15 million owe 40% on the excess
- Married couples with combined estates exceeding $30 million (assuming full portability and both exemptions are used)
- Owners of illiquid assets (real estate, closely held businesses, farmland) may face estate tax even at lower net worth levels if assets are difficult to value or liquidate
- Non-citizen surviving spouses cannot use the standard marital deduction without a Qualified Domestic Trust (QDOT), which complicates exemption planning
State estate taxes apply separately. Twelve states and the District of Columbia impose their own estate or inheritance taxes, often with much lower exemption thresholds. Massachusetts and Oregon exempt only $1 million. New York exempts $7,160,000 but has a "cliff" — if the estate exceeds 105% of the exemption, the entire estate is taxable, not just the excess.
What Are the Key Estate Planning Strategies for 2026?
The permanent $15 million exemption changes the planning calculus. Strategies that were urgent before the sunset are now less time-sensitive, but the higher exemption creates new opportunities for families in the $15–$30 million range.
Spousal Lifetime Access Trust (SLAT)
A SLAT is an irrevocable trust funded by one spouse for the benefit of the other. The grantor spouse uses their gift tax exemption to fund the trust, removing the assets from their estate. The beneficiary spouse can receive distributions from the trust during their lifetime, providing indirect access to the gifted funds. Each spouse can create a SLAT for the other, but the trusts must differ materially (different trustees, distribution standards, or assets) to avoid the reciprocal trust doctrine. A couple can shelter up to $30 million through dual SLATs while maintaining access to the funds through distributions to each other.
Grantor Retained Annuity Trust (GRAT)
A GRAT allows the grantor to transfer assets into an irrevocable trust while retaining annuity payments for a fixed term. If the assets appreciate faster than the IRS Section 7520 rate (published monthly by the IRS — check IRS.gov for the current month's rate), the excess growth passes to beneficiaries estate-tax-free. A "zeroed-out" GRAT is structured so the annuity payments return the full initial value to the grantor, making the gift tax cost effectively zero. The risk: if the grantor dies during the GRAT term, the entire trust is pulled back into the estate. Short-term rolling GRATs (2-year terms) minimize mortality risk.
Irrevocable Life Insurance Trust (ILIT)
Life insurance proceeds are included in the taxable estate if the decedent held any incidents of ownership. An ILIT owns the policy instead, removing the death benefit from the estate entirely. For a $50 million estate, the federal estate tax on the amount exceeding $15 million could reach $14 million. An ILIT holding a $15 million life insurance policy provides liquidity to pay the tax without selling the family business or real property. Premium payments to the ILIT qualify for the annual gift exclusion through Crummey withdrawal powers. The trust must be established at least three years before death to avoid the IRC § 2035 lookback.
Annual Exclusion Gifting Program
The $19,000 annual exclusion per recipient (2026) allows tax-free transfers without using any lifetime exemption. A married couple can give $38,000 per year to each child, grandchild, or other recipient. For a family with 4 children and 8 grandchildren, that's $456,000 per year removed from the estate. Over 10 years, $4.56 million plus any investment growth transfers tax-free. Gifts to 529 education savings plans can be front-loaded — up to $95,000 per beneficiary ($19,000 × 5 years) in a single year under the 5-year election, with no gift tax consequences.
How Does the Generation-Skipping Transfer Tax Apply?
The GST tax is a separate 40% tax imposed on transfers that skip a generation — gifts or bequests to grandchildren or more remote descendants, or to trusts benefiting them. The GST exemption mirrors the estate tax exemption at $15,000,000 for 2026. Unlike the estate tax exemption, the GST exemption is not portable between spouses.
GST Tax Quick Reference — 2026
IRC § 2601- GST tax rate: 40% (flat, applied on top of any estate or gift tax)
- GST exemption: $15,000,000 per person (not portable between spouses)
- Allocation: Must be affirmatively allocated on Form 709 (gift tax return) or Form 706 (estate tax return)
- Automatic allocation: Applies to direct skips and transfers to GST trusts unless the transferor opts out
- Dynasty trusts: In states without a rule against perpetuities (Nevada, South Dakota, Delaware), a properly structured dynasty trust can shelter assets from estate and GST tax for multiple generations
Failing to allocate GST exemption to a trust at the time of funding is one of the most expensive oversights in estate planning. A $10 million trust that grows to $40 million over 20 years will owe $16 million in GST tax on the full $40 million if the exemption was never allocated — even though $10 million of exemption was available at the time of funding.
What About State Estate Taxes?
Federal estate tax planning is only half the picture. State-level estate and inheritance taxes can impose significant additional liability, often at much lower exemption thresholds.
States With Estate or Inheritance Taxes (2026)
State TaxesEstate tax states (tax the estate): Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia
Inheritance tax states (tax the recipient): Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania
Key thresholds:
- Massachusetts and Oregon: $1,000,000 exemption
- New York: $7,160,000 (cliff — 105% rule eliminates the entire exemption)
- Connecticut: historically tracks near the federal exemption (verify current state cap)
- Washington: $2,193,000 exemption, top rate of 20% (highest in the nation)
Texas: No state estate tax, no inheritance tax
For clients in states with low exemptions, state-level estate tax planning is often more impactful than federal planning. A Massachusetts resident with a $5 million estate owes zero federal estate tax but faces state estate tax on $4 million above the $1 million exemption. State estate tax rates range from roughly 8% to 20% depending on the state and estate size.
Key Deadlines for Estate Tax Planning in 2026
- Annual gift tax exclusion: $19,000 per recipient; gifts must be completed by December 31, 2026
- 529 plan front-loading: Up to $95,000 per beneficiary (5-year election) in 2026
- Form 706 filing deadline: 9 months after date of death (6-month extension available)
- GRAT funding: Any time during 2026; the Section 7520 rate for the month of funding determines the hurdle rate
- ILIT establishment: Must exist at least 3 years before death to avoid IRC § 2035 inclusion
For estate and trust tax planning or questions about how the $15 million exemption affects your family's wealth transfer strategy, contact TS CPA for a free consultation. We respond within the same day.