For wealthy American families, January 1, 2026 brought welcome news from the IRS: the federal estate and gift tax exemption has risen to $15 million per individual, up from $13.99 million in 2025. For married couples who coordinate their estate planning, that means up to $30 million can now pass to heirs free of federal estate tax.
The increase—a 7.2% jump from the prior year—reflects inflation adjustments built into the tax code and modifications made by the One Big Beautiful Bill Act (OBBBA) signed into law in 2025. It represents the highest exemption level in American history, creating substantial planning opportunities for families with significant assets.
Understanding the Estate Tax Landscape
The federal estate tax applies to the transfer of assets at death, while the gift tax covers transfers during life. Both share a unified exemption: you can transfer up to $15 million over your lifetime (through gifts or at death) without federal transfer tax. Amounts exceeding the exemption are taxed at 40%.
For context on how dramatic the exemption increase has been: just two decades ago, in 2006, the exemption was $2 million. As recently as 2017, it was $5.49 million. The combination of the Tax Cuts and Jobs Act of 2017 (TCJA), inflation adjustments, and OBBBA modifications has nearly tripled that figure.
The current exemption means that fewer than 1% of American estates owe any federal estate tax. But for the families who do face it—those with assets exceeding $15 million (or $30 million for couples)—the stakes remain significant.
The OBBBA Changes
The One Big Beautiful Bill Act made the expanded estate tax exemption permanent, resolving years of uncertainty about whether exemptions would revert to lower levels. Prior to OBBBA, the exemption was scheduled to drop back to roughly $7 million (adjusted for inflation) after 2025 under the TCJA's original sunset provisions.
That sunset has been eliminated. High-net-worth families can now plan with confidence that the elevated exemption levels will persist, making multi-generational wealth transfer strategies more predictable.
Planning Opportunities for 2026
Estate planning attorneys are advising clients to consider several strategies in light of the increased exemption:
Lifetime giving: With $15 million in exemption per person, wealthy individuals can make substantial gifts to heirs during their lifetime—allowing assets to appreciate outside their estate. For example, gifting $10 million in appreciating assets today removes not just the $10 million, but all future growth, from the taxable estate.
Annual gift exclusion coordination: In addition to the $15 million lifetime exemption, the annual gift tax exclusion rose to $19,000 per recipient in 2026 ($38,000 for married couples giving jointly). Strategic use of annual exclusions can transfer significant wealth without touching the lifetime exemption at all.
Spousal portability planning: Married couples should ensure proper documentation to preserve a deceased spouse's unused exemption, known as "portability." This requires filing an estate tax return even if no tax is owed—a step many families overlook.
Generation-skipping transfers: The generation-skipping transfer (GST) tax exemption also rose to $15 million. Families with multi-generational wealth transfer goals should work with advisors to optimize the use of both exemptions.
State Estate Taxes Still Apply
While the federal exemption is generous, several states impose their own estate or inheritance taxes with much lower thresholds. Residents of these states face combined federal and state tax planning considerations:
| State | Estate Tax Exemption |
|---|---|
| Massachusetts | $2 million |
| Oregon | $1 million |
| New York | $6.94 million (2026) |
| Washington | $2.193 million |
| Connecticut | $15 million (matches federal) |
Residents of states with lower exemptions may still face significant state estate taxes even if they owe nothing federally. State-specific planning remains essential.
The Gift Tax Reality Check
While the exemption is substantial, the mechanics of using it require careful consideration:
Step-up in basis: Assets transferred at death receive a "step-up" in cost basis to fair market value, eliminating embedded capital gains. Gifts made during life do not receive this treatment—recipients inherit the donor's original cost basis. This creates trade-offs between estate tax savings and income tax efficiency.
Record keeping: Gifts exceeding the annual exclusion must be reported on IRS Form 709, even if no tax is owed. Lifetime exemption usage is tracked across your entire lifetime, making accurate record-keeping essential.
Irrevocability: Most advanced gifting strategies involve irrevocable transfers. Assets given away cannot be reclaimed, even if circumstances change. Work with advisors to ensure you retain sufficient assets for your own needs.
Who Should Act Now
Not everyone needs sophisticated estate planning. The $15 million exemption means most American families will never owe federal estate tax. However, several groups should be particularly attentive:
- Individuals with assets exceeding $10 million: Begin planning now to optimize exemption usage.
- Business owners: Private business interests can create valuation complexity. Professional valuation and planning are essential.
- Real estate investors: Appreciated properties present both opportunity (removal from estate) and challenge (loss of step-up).
- Families with state estate tax exposure: Those in high-tax states may need planning even with smaller estates.
- Heirs expecting inheritances: Understanding what's coming—and its tax implications—helps with your own financial planning.
Finding the Right Advisors
Estate planning at this level requires a team approach:
- Estate planning attorney: Essential for drafting wills, trusts, and other legal documents.
- CPA or tax advisor: Provides income tax analysis and coordinates gift tax reporting.
- Financial advisor: Helps model scenarios and coordinate with investment strategy.
- Insurance specialist: Life insurance can play a role in estate planning, particularly for illiquid estates.
The Bottom Line
The $15 million federal estate tax exemption represents an extraordinary planning opportunity for high-net-worth families. With the OBBBA making these elevated levels permanent, there's no need to rush into hasty decisions—but there's also no excuse for ignoring the opportunity.
For families with assets approaching or exceeding the exemption, 2026 is an ideal time to review your estate plan, consult with qualified advisors, and ensure your legacy is structured to achieve your goals with maximum tax efficiency. The rules are clear, the exemptions are high, and the opportunity is historic.
