When Maria Gonzalez, a 72-year-old widow in Portland, Oregon, sat down with her estate attorney in early 2025, the conversation centered on a single fear: that the federal estate tax exemption was about to be cut nearly in half, potentially exposing her $10 million estate to a tax bill her heirs could not afford without selling the family’s commercial real estate. That meeting, and millions like it across the country, became moot when Congress rewrote the rules.
The tax package signed into law in 2025 rewrote Section 2010(c)(3) of the Internal Revenue Code, raising the base exclusion amount from $5 million to $15 million per person and deleting the sunset clause entirely. For 2026, that means the first $15 million of an individual’s taxable estate and lifetime gifts is shielded from the 40% federal transfer tax. Married couples who elect portability can protect up to $30 million combined. The 40% top rate itself did not change.
The size of the shift becomes clear in comparison. The inflation-adjusted exemption for 2025 was $13.99 million per person, according to IRS Revenue Procedure 2024-40. Without new legislation, that figure would have dropped to roughly $7 million in 2026 when the TCJA provision expired, based on projections from the Tax Foundation and the Congressional Budget Office. Instead, the exemption climbed to $15 million, and for the first time since the TCJA era began, it carries no expiration date.
What the law actually changed
The statute accomplished two things simultaneously. First, it replaced the $5 million base figure in the tax code with $15 million, a number that will continue to be adjusted for inflation in future years under the same indexing formula used since 2011. Second, it struck the temporary subparagraph that had scheduled the TCJA’s higher exemption to revert after December 31, 2025. Removing that sunset is arguably the more consequential change, because it eliminates the uncertainty that had shaped nearly every major estate planning decision since 2017.
“The sunset was the single biggest driver of estate planning activity over the past seven years,” said Steve Akers, a senior fiduciary counsel at Bessemer Trust who has written extensively on transfer tax policy. “Taking it off the table changes the entire tempo of the conversation with clients.”
The IRS confirmed the new threshold in its newsroom summary of the broader tax package, listing the estate tax basic exclusion amount as $15,000,000 for tax year 2026. The agency’s updated page on estate and gift tax changes reaffirms that portability between spouses remains intact: a surviving spouse can claim any unused portion of a deceased spouse’s exemption by filing a timely estate tax return (Form 706), even if no tax is owed.
The generation-skipping transfer (GST) tax exemption, which mirrors the estate tax exemption, also rose to $15 million. That matters for families using dynasty trusts or other structures designed to pass wealth across multiple generations without triggering additional transfer taxes at each level.
Separately, the annual gift tax exclusion remains a distinct planning tool. The IRS set the 2025 figure at $19,000 per recipient in Revenue Procedure 2024-40; the 2026 amount has not yet been separately confirmed and will depend on inflation adjustments. At the $19,000 level, a married couple with three children and six grandchildren could transfer $342,000 a year in tax-free gifts before the lifetime exemption is even touched.
What this means for families and estates
The practical effect is most dramatic for estates in the $7 million to $15 million range. Under the old sunset scenario, many of those estates would have owed federal estate tax starting in 2026. Now they will not. Even estates well above $15 million benefit, because the higher exemption reduces the taxable portion subject to the 40% rate.
Consider a single individual who dies in 2026 with a $20 million estate. Under the new law, only $5 million is subject to the estate tax, producing a federal liability of roughly $2 million before credits and deductions. Had the exemption reverted to approximately $7 million, the taxable portion would have been $13 million, and the tax bill would have approached $5.2 million. The permanent $15 million exemption saves that estate more than $3 million.
For married couples, the math is even more favorable. With portability, a couple can shelter up to $30 million from federal estate tax, provided the first spouse’s estate files Form 706 to preserve the unused exemption. That filing requirement is easy to overlook. “It is the most expensive form people forget to file,” said Turney Berry, a trusts and estates partner at Wyatt, Tarrant & Combs in Louisville, Kentucky. “Skipping it can cost a family millions.”
State estate taxes still apply
The federal change does not override state-level estate or inheritance taxes, and that distinction catches people off guard. As of early 2026, roughly a dozen states and the District of Columbia impose their own estate taxes, many with exemption thresholds far below the new federal level. Massachusetts and Oregon, for example, tax estates above $1 million. Washington state’s exemption is approximately $2.2 million (adjusted annually for inflation). Connecticut, which had been gradually aligning its exemption with the federal level, faces a decision about whether to follow the new $15 million threshold or decouple.
A family in one of those states could owe zero federal estate tax and still face a six- or seven-figure state tax bill. That reality makes state-level planning, including the use of trusts, charitable strategies, and residency decisions, just as important as it was before the federal exemption increased.
What has not been resolved
Several important questions remain open. The Joint Committee on Taxation and the Treasury Department have not released a public revenue estimate quantifying how much federal revenue the permanent higher exemption will forgo over the standard ten-year budget window. Without that figure, the fiscal cost of the change is difficult to measure against competing priorities.
The IRS has not yet published updated Form 706 instructions reflecting the $15 million threshold. Executors preparing returns for decedents dying after December 31, 2025, will need revised forms, and the agency has not announced a timeline for those updates.
No official agency has projected how many estates will fall below the new threshold and owe no federal estate tax, or how many taxpayers will use the higher lifetime exemption for gifts during their lifetimes. Earlier estimates from the Tax Policy Center suggested that under the TCJA-era exemption, fewer than 0.1% of estates owed any federal estate tax. That share will shrink further under the $15 million permanent threshold, but by how much has not been quantified.
What existing plans may need revisiting
The permanence of the new exemption reshapes the calculus for many families, particularly those who made large gifts during the TCJA era to lock in the higher exemption before the anticipated sunset. Those gifts remain valid. The IRS confirmed through proposed regulations in 2019 (the so-called “anti-clawback” rule) that it would not recapture the tax benefit of gifts made under a higher exemption even if the exemption later decreased. With the exemption now permanently higher, the urgency that drove those transfers has faded, but the transfers themselves stand.
For families who held off on gifting, the permanent $15 million exemption opens a wider window. There is no longer deadline pressure to act before a sunset, which allows for more deliberate planning. That said, the exemption could still be reduced by future legislation. The permanence is statutory, not constitutional; a future Congress could lower the exemption just as this one raised it.
“I tell clients to think of this as a window that is open, not a door that is locked,” said Stacy Eastland, a senior wealth strategist at Goldman Sachs Ayco. “The political environment can change, and planning should account for that possibility.”
One planning nuance worth noting: assets transferred by gift during life retain the donor’s original cost basis, while assets passed at death receive a stepped-up basis to fair market value. That distinction matters for highly appreciated assets. In some cases, holding an asset until death and passing it through the estate, where it benefits from both the exemption and the basis step-up, can produce a better overall tax result than gifting it during life. The higher exemption makes that hold-and-bequeath strategy viable for a larger number of families.
Trusts funded with bypass or credit shelter provisions tied to the old exemption amounts also deserve a fresh look. Formula clauses in wills and trust documents that reference “the maximum amount sheltered from estate tax” will now point to $15 million rather than $13.99 million, potentially redirecting more assets into trust and less to a surviving spouse outright. Depending on the family’s goals, that shift may or may not be desirable, and attorneys are advising clients to review existing documents in light of the new number.
Why the $15 million exemption demands a fresh review of every estate plan drafted before 2026
The core legal facts are settled. The federal estate and gift tax exemption is $15 million per person for 2026, it is permanent, it is indexed for inflation, and portability remains available for married couples. Those points rest on the statute itself and on IRS guidance already published.
What remains unsettled is the broader fiscal picture: how much revenue the change will cost, how many estates and donors it affects, and what downstream effects it may have on wealth concentration and taxpayer behavior. Until the Joint Committee on Taxation, the Treasury Department, or independent analysts release detailed estimates, claims about those effects should be treated as informed speculation rather than established fact.
For anyone whose estate could approach or exceed the new threshold, the most concrete step right now is to sit down with a qualified attorney or tax advisor and walk through every document signed before 2026. The rules have changed, the deadline pressure has lifted, and the planning decisions that made sense six months ago may no longer fit.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
