Estate taxes have been a moving target in recent years. A higher estate tax exemption established in 2018 was set to expire in 2026. But as a result of the One Big Beautiful Bill Act (OBBA), that’s no longer happening. However, it’s still important to know what’s going on with estate taxes and how they may impact the amount of your wealth that will be passed on to loved ones.
Whatever the size of your estate, understanding the new landscape can help you see how estate taxes fit into your broader retirement and legacy planning and make more informed decisions.
Background on 2026 Estate Tax Changes
To understand what’s happening in 2026, we first need to set the stage and provide background on what was going to happen before the recent changes were implemented. To do that, we need to look back at the Tax Cuts and Jobs Act of 2017.
This law made significant changes to several key tax items beginning in 2018. Estate tax exemptions were one of the major items affected by the law, doubling the basic exclusion amount from $5 million to $10 million. Due to inflation adjustments, the estate tax exemption rose to $13.99 million in 2025. However, the law contained a sunset provision, which meant that without direct action from Congress, the exemption amount would revert to pre-TCJA levels beginning in 2026.
When the One Big Beautiful Bill was passed into law in July 2025, it made many of the TCJA’s provisions permanent, including the increased estate tax exemption. It will not sunset in 2025, which means that the current exemptions will continue.
Why This Change Matters
This change matters because it significantly reduces the amount of your estate that would have been subject to taxation beginning in 2026. The overwhelming majority of estates will pass without paying any estate taxes.
For example, if the exemption amount were allowed to sunset, an estate valued at $10 million would have likely resulted in several million dollars of estate value subject to taxation. With the new law, that estate will now avoid estate tax entirely.
Review Your Estate Planning Documents and Designations
Even though this new law makes key estate tax provisions of the Tax Cuts and Jobs Act permanent and significantly reduces the impact of the estate tax for most people, it’s still important to review your estate plan. This includes beneficiary designations, trust documents, and life insurance policies.
- Beneficiary Designations
Accounts with named beneficiaries, such as retirement and brokerage accounts, bypass your estate probate process. Instead, they are paid directly to the named individuals. This can simplify things as well as speed up the process.
- Trust Documents
If you have a trust, it’s important to review the terms periodically to ensure they still support your goals and align with the new tax law changes. Even though the One Big Beautiful Bill extends the increased exemption amount, your trust may reference outdated language or be written with the sunset in mind.
- Life Insurance
In most cases, life insurance death benefits pay out to beneficiaries without any tax obligations. This can be a valuable source of financial resources to help your loved ones take needed time off to grieve, settle things related to your estate, or provide support to those who relied on you.
Strategies to Reduce Taxation
Even though the OBBB extends the TCJA estate tax exemption, large estates will still be subject to estate taxes. For 2025, that means estates worth more than $15 million per individual or $30 million per couple. If your estate will fall into this category, you may be able to reduce your future estate tax liability through certain gifting and other strategies.
- Use the Annual Gift Tax Exclusion
You are able to give up to $19,000 per year (in 2025), per person, free of gift taxes, and without reducing your lifetime exclusion amount. A couple can give up to $38,000 per recipient. If you have a large estate, you may consider making a series of annual gifts while you are still alive to reduce your taxable estate before you pass.
- Donate Appreciated Assets
If you regularly donate to charitable organizations, consider giving highly appreciated assets rather than cash. These assets are generally deductible at their current fair market value, rather than at the amount you paid for them. This also will potentially reduce your future taxable estate, since the assets will no longer be yours.
- Establish a Trust
Certain types of trusts can also remove assets from your taxable estate and reduce your future tax liability. However, there are many types of trusts, and each serves a specific purpose and provides certain benefits. Be sure that the type of trust you select satisfies your goals and accomplishes what you want it to.
2026 Estate Tax Changes
Actual changes to the estate tax in 2026 will be significantly different from the previously planned changes. In fact, they are mostly a continuation of the current rules. In other words, the big change is that there isn’t much of a change. However, that doesn’t mean you need to ignore it. The most important thing you can do to prepare is stay informed about how the new rules work and apply them to your situation.
Through a well-crafted estate plan, you can ensure you are focused on your goals, whether you want to minimize your taxes, support loved ones, or ensure your wishes are carried out. Proactive planning puts you in control.
Frequently Asked Questions
What will happen to the estate tax in 2026?
Due to the One Big Beautiful Bill, the estate tax exemption amount will not revert back to pre-2018 levels. The individual exemption amount will be $15 million, and the couple’s exemption will be $30 million.
What if my estate is below the exemption amount?
The overwhelming majority of estates will fall under the exemption amount. In that case, no federal estate tax will be owed. However, that doesn’t mean no taxes will be owed at all. Your heirs may still have other tax liabilities, depending on what they inherit and what they do with those assets.
Is life insurance included in my taxable estate?
In most cases, life insurance is paid directly to beneficiaries and not included in your taxable estate. Be sure to review your beneficiary designations and discuss implications with your tax professional, financial advisor, and estate attorney.
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