The Federal Estate Tax Exemption Just Hit $15 Million: What Changed and What You Should Do Now

The federal estate and gift tax exemption has reached its highest level in American history. As of January 1, 2026, the exemption stands at $15 million per individual — $30 million for married couples. This isn't a temporary spike. It's the result of the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, which permanently rewrote Section 2010(c)(3) of the Internal Revenue Code and eliminated the looming "sunset" that had estate planners scrambling for years.

If you haven't revisited your estate plan since 2025, you're almost certainly working from outdated assumptions. Here's what changed, why it matters, and what you should be doing about it.

The Old Threat Is Gone

Under the Tax Cuts and Jobs Act (TCJA) of 2017, the federal estate tax exemption was temporarily doubled — reaching $13.99 million per individual by 2025. But that increase was set to expire at the end of 2025, threatening to drop the exemption back to approximately $7 million. Estate planners called it the "use it or lose it" window, and it drove years of aggressive gifting, Spousal Lifetime Access Trusts (SLATs), and Grantor Retained Annuity Trusts (GRATs).

The OBBBA permanently averted that sunset. The exemption is now $15 million per person, inflation-adjusted, with no expiration date. The top federal transfer tax rate remains at 40%.

The New Numbers at a Glance

The key figures for 2026 are straightforward. The individual lifetime exemption is $15 million, up from $13.99 million in 2025. Married couples can shield $30 million through proper portability elections, up from $27.98 million. The annual gift tax exclusion remains at $19,000 per donee ($38,000 for couples splitting gifts). The annual exclusion for gifts to a non-U.S. citizen spouse increased to $194,000, up from $190,000. The generation-skipping transfer (GST) tax exemption is $15 million. The top federal transfer tax rate is unchanged at 40%.

The Strategy Has Shifted

This is where most people miss the critical update. The old playbook was built around aggressive gifting to reduce the size of your taxable estate. When the exemption was expected to drop to $7 million, that strategy made sense — you wanted assets out of your estate before the hammer fell.

With a $15 million exemption, the calculus has changed fundamentally. For families with a net worth between $14 million and $30 million, the focus should shift from transfer tax avoidance to income tax planning, specifically the preservation of the IRC Section 1014 "step-up in basis."

Here's the core principle: when you gift an appreciated asset during your lifetime, the recipient inherits your original cost basis. If they later sell the asset, they may owe substantial capital gains taxes. But when that same asset passes through your estate at death, the beneficiary receives a "stepped-up" basis equal to the asset's fair market value at the time of death — potentially eliminating decades of accumulated capital gains.

If your total estate is under the $15 million threshold, retaining highly appreciated assets in your estate is often more mathematically efficient than gifting them. The estate tax won't apply, and your heirs get the step-up in basis. This is a major shift from the pre-2026 approach.

What About the GST Exemption?

One critical nuance that hasn't changed: while the estate and gift tax exemptions are portable between spouses, the generation-skipping transfer (GST) tax exemption is not. A surviving spouse cannot inherit a deceased spouse's unused GST exemption.

This means practitioners must continue to utilize reverse QTIP elections or aggressively fund GST-exempt trusts at the first spouse's death to ensure the full $30 million GST capacity of a married couple is not permanently forfeited.

Charitable Planning Has Changed Too

The OBBBA introduced a deduction floor for individual itemizers: charitable contributions are only deductible to the extent they exceed 0.5% of the taxpayer's adjusted gross income (AGI). This materially reduces the immediate tax benefit of ad hoc charitable giving and makes "bunching" strategies — concentrating multiple years of charitable contributions into a single year, often through a Donor Advised Fund (DAF) — more important than ever.

Additionally, the repeal of Section E of Rule 68 means that non-grantor trusts and estates that are entirely payable to charities may now be subject to income taxation. This fundamentally alters the utility of Charitable Lead Trusts (CLTs) structured as non-grantor trusts.

E-Filing for Form 709 Is Finally Here

On the administrative side, e-filing is now permanently available for federal Gift Tax Returns (Form 709). This eliminates the ambiguity of mailed returns and uncashed checks, providing instant confirmation of receipt. For executors required to attach copies of all lifetime gift tax returns to the final Estate Tax Return (Form 706), this removes a major bottleneck in the post-mortem settlement process.

Don't Wait for the Rules to Change Again

The $15 million exemption is permanent — for now. But future Congresses can always reduce it. The political climate is uncertain, and estate tax policy is a perennial target in budget negotiations. The window to plan under favorable terms is open, but it may not stay this way indefinitely.

If your estate plan was written before 2026, it almost certainly reflects assumptions about exemption levels, gifting strategies, and trust structures that no longer apply. Now is the time to review your documents, reassess your trust structures, and consider whether gifts or trust funding under the current exemption make sense for your family.

What You Should Do Now

The immediate priorities are clear: review any estate plan drafted before 2026 — it likely assumes lower exemptions. Reassess whether aggressive gifting is still the right strategy or whether retaining assets for the step-up in basis makes more sense. Ensure your GST planning is intact, especially if a spouse has already passed. Review your charitable giving strategy in light of the new 0.5% AGI floor. Consider "locking in" gifts under the current $15 million exemption before any future legislative changes.

Need help navigating the new estate tax landscape? Contact Riefkohl Law — serving clients in Puerto Rico and across the United States.

riefkohllaw.com | hans.riefkohl@riefkohllaw.com

This article is provided for educational and informational purposes only. It should not be construed as legal or tax advice. Consult with a qualified attorney or tax professional regarding your specific situation.