The Estate Tax Exemption Just Rose to $15 Million in 2026 -- What It Means for Your Legacy Plan

The U.S. tax code, overseen by the Internal Revenue Service (IRS), is quite wonky, which is why many individuals simply don't worry about it until it's too late. Last year, Congress passed President Donald Trump's signature piece of legislation thus far in his second term, known as the One Big Beautiful Bill Act (OBBBA).

While the legislation was sprawling, allocating spending across many government departments, it also focused heavily on tax cuts, primarily making many of the cuts that Congress implemented during Trump's first term permanent. It also added several new tax cuts and provisions.

One of the provisions made the estate tax exemption, which was set to sunset after 2025, permanent, and even increased it to $15 million per individual. This is a big deal, particularly for high-net-worth individuals. Here's what it means for your legacy estate planning.

What is the estate tax exemption?

If you're younger, you likely haven't thought much about the estate tax exemption, unless you've been the recipient of a transfer upon someone's death or gifted money.

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An estate essentially includes all of a person's assets, including real estate, financial accounts, and even personal belongings. The estate tax exemption looks at how much of a person's estate can be transferred tax-free upon death.

In 2025, the federal estate and gift tax exemption was $13.99 million. However, OBBBA increased it to $15 million per individual this year and $30 million for married couples. Future raises will be indexed based on inflation.

Understanding other factors affecting the estate tax exemption

Making the estate tax exemption permanent should give retirees and others considering their estate plans greater certainty in their planning, at least for several years. But it's also a good idea for high-net-worth individuals to understand other considerations, because amounts gifted or transferred above the estate tax exemption threshold may be taxed at a federal rate of up to 40%.

For instance, the estate tax exemption is not the only way to transfer assets tax-free. There's also a lifetime gift tax exemption that will allow an individual, starting in 2026, to transfer up to $15 million tax-free over their lifetime.

Keep in mind that the IRS treats these together, so if you gift $3 million over your lifetime using the lifetime gift exemption, only $12 million can be transferred tax-free at your death. It's a combined amount.

There's an annual amount that people can give in tax-free gifts without reducing the total lifetime exemption. This amount is $19,000 per beneficiary per year and $38,000 for married couples. This amount is also adjusted for inflation each year. There's also no limit on the number of beneficiaries to whom this annual gifting applies, so if you have five kids, you can gift $75,000 total without taking a hit on the estate tax exemption.

Plus, as I mentioned above, the $15 million exemption applies per individual in a legal marriage, so the total can be $30 million. Upon the death of one spouse in a legal marriage, the remaining amount of their $15 million exemption can be transferred to the other spouse, provided the executor of the deceased spouse promptly files a Form 706 estate tax return.

A positive effect

Ultimately, individuals will see their estate tax exemption rise by about $1 million in 2026, with further increases in future years based on inflation. Of course, this really only applies to high-net-worth individuals.

If you fall into this category, it's important to review the current state of your lifetime gift exemption and sit down with an advisor to examine any tax-efficient strategies that can be employed.

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