For years, wealthy Americans sat with one eye on the calendar. The Tax Cuts and Jobs Act of 2017 had doubled the federal estate tax exemption, but with an expiration date built right into the law. If Congress did nothing, the exemption was set to fall by nearly half on January 1, 2026. Estate planners warned clients. Financial advisors urged action. Then the rules changed again. Signed into law on July 4, 2025, the One Big Beautiful Bill Act permanently increased the lifetime gift, estate, and generation-skipping transfer tax exemptions. Beginning January 1, 2026, the federal exemption rose to $15 million per individual and $30 million for married couples, repealing the TCJA’s sunset provision that would have reduced the exemption to approximately $7 million per person. That outcome reframed the entire estate planning conversation heading into 2026.
How the TCJA Sunset Was Expected to Unfold
The Tax Cuts and Jobs Act of 2017 roughly doubled the estate tax exemption from a $5 million base to about $11.18 million, but that increase was always temporary. It was scheduled to expire on December 31, 2025, which would have dropped the exemption back to roughly $7 million per person after inflation adjustments. For families with significant assets, this deadline created genuine urgency.
At the start of 2025, estate planners and their clients were bracing for a dramatic shift. Under the rules then in place, the generous federal gift and estate tax exemptions were poised to expire at year’s end. Without legislative action, the lifetime exclusion would have been cut almost in half on January 1, 2026. Families were scrambling to make large gifts, create irrevocable trusts, and otherwise “use it or lose it” before the clock ran out.
What the One Big Beautiful Bill Actually Did
The One Big Beautiful Bill Act eliminated the TCJA’s 2026 sunset provision and permanently increased the federal lifetime gift, estate, and generation-skipping transfer tax exemptions to $15 million per person, or $30 million for married couples, starting January 1, 2026, with future increases indexed for annual inflation. This was a significant departure from the “temporary” structure that had defined estate tax law since 2017.
Rather than facing the feared sunset decrease, the new law raises the estate and gift tax exemption to a baseline of $15 million per person starting on January 1, 2026. Unlike the TCJA increase, there is no sunset provision. Starting in 2027, the exemption amount will be indexed for inflation, which can help mitigate the impact of rising costs. The shift removed the hard deadline that had driven planning decisions for several years.
The $15 Million Threshold: What It Means in Practical Terms
Estates of decedents who die during 2026 have a basic exclusion amount of $15,000,000, up from a total of $13,990,000 for estates of decedents who died in 2025. That increase of roughly $1 million per person may sound modest, but the more significant shift is the permanence behind it. The $15 million exemption is the new permanent baseline, and it will adjust upward for inflation each year starting in 2027.
For married couples, the combined exemption can reach $30 million in 2026, thanks to a provision known as portability. Portability allows a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. This means that if one spouse dies and doesn’t use their full $15 million exemption, the surviving spouse can add the unused amount to their own, potentially protecting up to $30 million from estate taxes. To take advantage of portability, the executor of the deceased spouse’s estate must file a timely estate tax return, even if no tax is owed.
The 40% Tax Rate Still Applies Above the Exemption
The top federal estate tax rate remains 40%, and it applies only to the portion of an estate that exceeds the exemption. That number hasn’t moved, and for families with estates well above $15 million, it still carries serious weight. Despite the higher exemption, estate tax planning remains essential. The 40% tax rate is significant, and many individuals, especially business owners, real estate investors, and those with concentrated stock positions, may still face exposure.
An estate can still appreciate at a rate well above the yearly inflation adjustment for the gift and estate tax exemption. If investment growth is strong over a decade, a $15 million estate could grow substantially while the exemption rises only modestly with inflation, resulting in a sizable portion going to the IRS rather than to beneficiaries after passing. That gap between estate growth and exemption growth is where planning still earns its keep.
State-Level Estate Taxes Remain a Separate Concern
Federal estate tax is only half the picture in some parts of the country. Twelve states and the District of Columbia impose their own estate taxes, and five states impose inheritance taxes. Maryland is the only state that levies both. These state-level obligations can catch families off guard, particularly if their planning focused exclusively on the federal threshold.
State estate tax exemptions are far lower than the federal threshold. Oregon’s exemption starts at just $1 million, Massachusetts at $2 million, and most others cluster in the $2 million to $7.35 million range. That means an estate worth $4 million might owe nothing to the IRS but face a significant state estate tax bill depending on where the decedent lived. State estate tax rates vary widely as well; Washington raised its top rate to 35% in 2025, making it the highest in the country.
Irrevocable Trusts, SLATs, and GRATs Still Matter
Before the OBBBA, the Tax Cuts and Jobs Act’s doubled estate tax exemption was set to sunset on December 31, 2025, reverting to approximately $7 million per individual. That cliff created a planning frenzy in 2024 and early 2025, with high-net-worth families rushing to fund irrevocable trusts before the deadline. With the sunset removed, that urgency has lifted. The value of these structures has not.
Trust strategies continue to offer robust benefits. Spousal Lifetime Access Trusts, irrevocable life insurance trusts, and dynasty trusts can help preserve wealth across generations while providing asset protection and tax efficiency. Single individuals can realize similar estate and gift tax benefits through a strategy called an Intentionally Defective Grantor Trust. In a permanently higher exemption environment, GRATs are especially powerful for families who have already used significant lifetime exemption and want to transfer additional wealth without dipping further into the $15 million cap.
The Annual Gift Exclusion and Lifetime Gifting Strategy
For tax year 2026, the annual exclusion for gifts remains at $19,000. That number may seem small compared to the lifetime exemption, but consistent annual gifting over many years adds up quietly and efficiently. One way to reduce the size of a taxable estate is by making annual gifts. The annual gift tax exclusion allows individuals to transfer wealth each year without reducing their lifetime exemption. Over time, steady gifting lowers the taxable estate while providing meaningful support to children, grandchildren, or other beneficiaries.
The $15 million exemption applies to gifts and estate taxes combined, so any portion of the exemption used for gifting during a lifetime will reduce the amount available for the estate tax. This unified structure means every large lifetime gift needs to be tracked carefully. Lifetime gifting can still be an effective way to transfer wealth, reduce future tax exposure, and shift future appreciation outside of a taxable estate, even with a higher federal estate tax exemption.
The Great Wealth Transfer and Why Planning Cannot Wait
Over the next two decades, an estimated $124 trillion in net wealth is expected to pass from the Silent Generation and Baby Boomers to Gen X, Millennials, and Gen Z, with the vast majority of assets concentrated among high-net-worth and ultra-high-net-worth households. This great wealth transfer is more than just a shift in financial assets; it represents a generational shift in values, investment decisions, and approaches to wealth management.
Cerulli projects that wealth transferred through 2048 will total $124 trillion, with $105 trillion expected to flow to heirs while $18 trillion will go to charity. Nearly $100 trillion will be transferred from Baby Boomers and older generations, representing roughly 81% of all transfers. Against that backdrop, Empathy’s 2026 research found that only 31% of families have a formal estate plan, and only 32% have a will. The gap between the scale of wealth in motion and the readiness of families to manage it thoughtfully is striking.
What High-Net-Worth Families Should Do Right Now
The permanence of the OBBBA provisions is only as secure as the political climate allows. Congress retains the authority to amend or repeal tax laws, and future administrations may seek to revisit the estate tax framework. Planning with flexibility and foresight is key to navigating this uncertainty. That reality hasn’t changed just because today’s rules are more favorable.
For most families, the new exemption reduces federal transfer tax pressure and refocuses planning on income tax efficiency, basis step-up, trust flexibility, and state estate tax coordination. For clients whose wealth approaches or exceeds the new thresholds, this remains a critical window to remove future appreciation from the taxable estate and to structure trusts for income, asset protection, and multigenerational objectives. Families that built plans around the old sunset provisions should revisit them. Outdated plans may include provisions based on older and much lower exemption levels or strategies that no longer apply.
The shift from a looming exemption cliff to a permanent $15 million baseline is genuinely good news for wealthy families. Still, estate planning was never just about deadlines. Growth compounds, tax laws evolve, and family circumstances change in ways no statute can predict. The families who benefit most from today’s generous rules will be the ones who didn’t wait for a deadline to start planning in the first place.
