Estate Tax 2026: The Permanent $15 Million Exemption Under OBBBA

Estate Planning Published May 19, 2026 Updated May 24, 2026

The One Big Beautiful Bill Act locked the federal estate, gift, and generation-skipping transfer (GST) tax exemption permanently at $15 million per person starting in 2026, indexed for inflation from the 2025 base year. The 40% top rate is unchanged. For families that had been racing to lock in lifetime gifts before the TCJA's scheduled December 31, 2025 sunset, the urgency has eased. State estate and inheritance taxes in 17 jurisdictions remain a separate and important consideration. This post walks through the 2026 numbers, what "permanent" really means, spousal portability, and how state-level taxes layer on top of the federal exemption.

The 2026 Federal Estate Tax Numbers

• Lifetime exemption (individual): $15,000,000 (indexed from 2025 base)
• Lifetime exemption (married couple via portability): $30,000,000
• Top estate tax rate: 40%
• Annual gift tax exclusion: $19,000 per donor per donee for 2026 (per Rev. Proc. 2025-32 §4.42)
• GST tax exemption: same as the estate/gift exemption ($15M)
• Estate tax brackets: graduated from 18% to 40%, but most estates over the exemption are at or near the 40% top rate

The unified credit equivalent (the cumulative amount you can transfer free of federal estate and gift tax during life and at death combined) is $15 million per person, indexed for inflation each year.

What "Permanent" Actually Means

OBBBA §70106 set the estate exemption permanently at the higher amount starting in 2026, replacing the TCJA's scheduled sunset to roughly $7M. "Permanent" in tax law means "no scheduled expiration in current law." A future Congress could pass legislation reducing the exemption back to its pre-TCJA level. The Estate Tax Repeal advocates have proposed full repeal; estate tax expansion advocates have proposed exemptions as low as $3.5M.

For planning purposes:

• If you completed large lifetime gifts in 2024 or 2025 expecting the 2026 sunset, those gifts remain effective. The IRS issued anti-clawback regulations (Reg. 1.2010-1) so gifts made when the exemption was higher cannot retroactively become taxable if the exemption later drops.
• The locked-in $15M floor means planning urgency has eased; you can be more deliberate about lifetime giving.
• The 40% rate is high enough that estates well over $15M still benefit from advanced planning structures.

The Annual Gift Tax Exclusion

The annual gift tax exclusion is separate from the $15M lifetime exemption. Each donor can give up to $19,000 per donee in 2026 with no use of lifetime exemption and no gift tax filing requirement. Married couples can elect to "gift split" and give $38,000 per donee jointly even if only one spouse provided the funds.

Practical applications:

• A couple with three children and seven grandchildren can move $38,000 × 10 = $380,000 out of their estate every year using only annual exclusions, with no impact on the $30M combined lifetime exemption.
• Direct payments of tuition (to the school) or medical expenses (to the provider) are completely exclusion-exempt under IRC §2503(e). These do not count against the annual or lifetime exclusion.
• 529 college savings plan contributions can be "superfunded" using a five-year election: up to 5x the annual exclusion ($95,000 per donee in 2026) gifted in year one and treated as if spread evenly over five years for gift tax purposes.

State Estate and Inheritance Taxes Layered on Top

Seventeen jurisdictions impose their own estate or inheritance tax in 2026, often at lower exemptions than the federal $15M. The federal estate tax allows a deduction for state estate tax paid, which mitigates the doubling but does not eliminate it.

Iowa repealed its inheritance tax effective January 1, 2025. New York has an unusual "cliff" feature: an estate above 105% of the exemption ($7.516M in 2026) loses the exemption entirely and is taxed on the full amount.

For families with estates between $2M and $15M, state estate tax matters more than federal. A $10M estate in Massachusetts owes roughly $1.0M in state estate tax even though no federal tax is due.

Portability Between Spouses (DSUE, Form 706)

The deceased spousal unused exclusion (DSUE) lets a surviving spouse claim the deceased spouse's unused estate tax exemption, effectively combining the couple's exemption into a single $30 million pool. The portability election must be made on Form 706 (the federal estate tax return) filed for the deceased spouse, even if no estate tax is owed and the estate is below the filing threshold.

The IRS extended the late-portability filing window in Rev. Proc. 2022-32: a Form 706 filed solely to elect portability is timely if filed within 5 years of the decedent's death. Missing portability is one of the most expensive and avoidable errors in estate planning.

Lifetime Gifting Strategies Now That the Exemption Is Permanent

Pre-OBBBA, many planners pushed clients to use their $13.99M (2025) exemption before the scheduled 2026 sunset. With the floor now permanently at $15M, the urgency has shifted. Strategies that still make sense:

• Grantor-retained annuity trusts (GRATs): zero out the gift value of high-growth assets by retaining annuity payments equal to the IRS §7520 hurdle rate. If the asset outperforms the hurdle, the excess passes to the remainder beneficiary gift-tax-free.
• Spousal lifetime access trusts (SLATs): each spouse creates an irrevocable trust for the other, removing the gifted amount from each estate while preserving family access to the funds. Reciprocal trust doctrine limits how identical the two trusts can be.
• Irrevocable life insurance trusts (ILITs): hold a life insurance policy outside the estate, often funded with annual-exclusion gifts (Crummey letters). Useful when life insurance proceeds would otherwise push an estate over the federal or state exemption.
• Charitable lead annuity trusts (CLATs): pay an annuity to charity for a term, then remainder to family. Generates a current income or estate tax deduction.
• Family limited partnerships (FLPs) and LLCs: enable valuation discounts for lack of control and marketability on transferred minority interests. IRS Sec. 2704 attacks aggressive discounts but reasonable ones remain.

Generation-Skipping Trusts and the GST Exemption

The GST tax is a separate 40% federal tax on transfers that skip a generation (typically grandparent to grandchild). The GST exemption is also $15M per person in 2026 (matching the estate/gift exemption). Trusts allocated GST exemption at funding can compound for multiple generations free of additional federal transfer tax.

"Dynasty trusts" in states without rule-against-perpetuities limits (South Dakota, Delaware, Nevada, Alaska, Wyoming, and others) can theoretically run indefinitely, sheltering wealth from estate tax across many generations. The $15M GST exemption is fully usable to fund such structures.

Estate Planning Documents Every Adult Needs

Federal estate tax planning matters only for estates above $15M (or $30M per couple). Most Americans will never owe federal estate tax. But every adult needs basic estate documents regardless of net worth:

• Will: directs distribution of assets and names guardians for minor children. Without one, state intestacy law decides.
• Durable power of attorney: authorizes someone to manage finances if you become incapacitated.
• Healthcare proxy or durable power of attorney for healthcare: authorizes someone to make medical decisions.
• Living will or advance directive: documents your preferences for end-of-life care.
• Beneficiary designations: review and update for retirement accounts, life insurance, and TOD/POD bank accounts. These override your will.
• Revocable living trust (optional but common): avoids probate, may speed asset transfer at death, useful in states with slow or expensive probate processes.

Frequently Asked Questions