2026 TCJA Sunset: Estate Planning Under $13.6M Impact

Estate planning 2026 looks very different from earlier projections because the federal estate and gift tax exclusion did not fall after 2025.

Instead, legislation enacted in 2025 increased the federal basic exclusion amount to $15 million per individual for 2026.

This change reduces the immediate federal estate tax exposure previously expected for many estates below approximately $13.6 million.

What Changed for Estate Planning in 2026

Earlier projections assumed that the higher federal estate and gift tax exemption created under the 2017 Tax Cuts and Jobs Act would expire.

Under that scenario, the exclusion was expected to fall sharply after December 31, 2025, potentially affecting many additional estates.

That outcome did not occur because legislation signed in 2025 established a $15 million basic exclusion amount for 2026.

The 2026 Federal Estate Tax Exclusion

For individuals who die during 2026, the IRS lists a federal basic exclusion amount of $15 million.

This is higher than the $13.99 million exclusion applicable to estates of individuals who died during 2025.

The change substantially alters planning assumptions developed before the new law because the federal threshold moved upward instead of downward.

Why Earlier TCJA Sunset Projections Changed

The Tax Cuts and Jobs Act temporarily increased the federal estate and gift tax exemption beginning in 2018.

Without additional legislation, that temporary increase was expected to expire after 2025 and return closer to pre-TCJA levels.

New legislation enacted in 2025 amended the applicable tax provisions, preventing the previously anticipated reduction for 2026.

What This Means for Previous Estate Plans

Estate plans developed around an expected 2026 exemption decline may contain strategies based on assumptions that are no longer current.

That does not automatically make those plans inappropriate, because trusts and gifting strategies can serve purposes beyond federal estate taxes.

However, reviewing the original objectives can help determine whether prior planning decisions still match the family's financial circumstances.

How the $15 Million Exclusion Affects Smaller Estates

Estates below $13.6 million generally face less immediate federal estate tax pressure than earlier sunset projections suggested.

The higher $15 million exclusion means an estate at that level is below the 2026 basic exclusion amount before considering other factors.

Federal estate tax planning may therefore become less urgent for some families, although broader estate planning remains important.

Estate Value Is Only One Consideration

Estate planning involves more than determining whether assets exceed the federal estate tax exclusion applicable during a particular year.

Wills, trusts, beneficiary designations, incapacity planning, asset ownership, and family circumstances can remain important regardless of estate size.

State taxes and future asset appreciation may also affect planning even when the current estate remains below the federal threshold.

Understanding the Federal Estate Tax Exemption

The federal basic exclusion amount generally determines how much qualifying wealth can pass before federal estate tax exposure begins.

For 2025, the IRS lists the exclusion at $13.99 million, while the 2026 amount increases to $15 million.

Married couples may have additional planning considerations, including portability of a deceased spouse's unused exclusion when requirements are satisfied.

How Portability Works

Portability can allow a surviving spouse to use the deceased spouse's unused federal estate tax exclusion when a proper election is made.

This can increase the amount potentially available to the surviving spouse beyond their own individual basic exclusion amount.

Because filing requirements and deadlines matter, portability decisions should be evaluated carefully rather than assumed to occur automatically.

Lifetime Gifting Still Deserves Careful Planning

The higher 2026 exclusion does not eliminate the role of lifetime gifting within broader estate and wealth-transfer strategies.

Gifts can transfer assets during life, reduce future estate growth, or support children and other beneficiaries before the donor's death.

However, significant gifts are generally irrevocable and can create tax, liquidity, basis, and personal financial consequences that require careful analysis.

Evaluating Large Lifetime Gifts

A large transfer should begin with determining how much wealth the donor can comfortably give away without compromising long-term financial security.

Income needs, healthcare costs, longevity, investment risk, and access to liquid assets should all be considered before transferring substantial wealth.

Professional legal and tax advice can help evaluate whether gifting actually supports the family's broader objectives under current rules.

Advanced Planning Techniques

Trust structures such as GRATs, ILITs, and SLATs may still serve specific estate, insurance, or wealth-transfer objectives.

The usefulness of each technique depends on family circumstances, asset type, tax exposure, control needs, and long-term financial goals.

These arrangements can involve significant legal complexity and should generally be structured with experienced estate planning professionals.

State Estate and Inheritance Taxes Still Matter

The federal exclusion is only one part of the tax picture because some states maintain separate estate or inheritance tax systems.

State thresholds can be considerably lower than the federal $15 million exclusion and may follow completely different rules.

Families should therefore evaluate the laws of the relevant state instead of assuming the federal exemption determines all potential estate taxes.

Federal and State Rules Can Differ

An estate may fall well below the federal filing threshold while still facing a state-level estate or inheritance tax obligation.

Residence, property location, beneficiary relationships, and state-specific exemptions can influence whether additional taxes become relevant.

Coordinating federal and state planning helps prevent an estate plan from focusing on one tax system while overlooking another.

Revisiting Wills, Trusts, and Beneficiaries

Major changes in tax assumptions provide a useful reason to review estate documents even when no immediate federal tax exposure exists.

Older wills and trusts sometimes contain formulas tied directly to exemption amounts, which can produce unintended distributions as thresholds change.

Beneficiary designations should also be reviewed because many retirement accounts and insurance policies transfer outside the instructions contained in a will.

Updating Wills and Trusts

Trust formulas drafted around earlier exemption amounts may no longer divide property in the way the original estate owner intended.

Reviewing those provisions can confirm whether asset distribution, spouse protections, and family objectives still function properly under current law.

An update may also be appropriate after major changes involving marriage, divorce, children, business ownership, residence, or financial circumstances.

• Review provisions linked directly to federal estate tax exemption amounts.

• Confirm that trust language still reflects current family objectives.

• Update documents after major personal or financial changes.

Reviewing Beneficiary Designations

Beneficiary forms on retirement accounts and life insurance policies can determine who receives assets regardless of instructions written in a will.

Primary and contingent beneficiaries should therefore be checked periodically to make sure they still match the broader estate plan.

Marriage, divorce, births, deaths, and changes in family relationships are common reasons to revisit these designations.

• Verify primary beneficiaries on retirement and insurance accounts.

• Confirm contingent beneficiaries remain appropriate.

• Coordinate account designations with wills and trust provisions.

Asset Growth Can Still Change the Picture

An estate below $15 million today may grow substantially over time through investment returns, business appreciation, real estate, or insurance proceeds.

That makes future value an important planning consideration rather than relying exclusively on the estate's current market value.

Younger individuals or business owners may face particularly large differences between today's estate value and the value ultimately transferred.

Planning for Future Appreciation

Assets with high growth potential can increase an estate more quickly than cash or other relatively stable holdings.

Business interests, concentrated investments, and rapidly appreciating property may therefore deserve additional attention in long-term planning.

Periodic valuation reviews can help identify when an estate is approaching levels where more sophisticated strategies may become relevant.

Why Estate Planning Still Matters Below $15 Million

Federal estate taxes affect only one portion of the decisions families must make about transferring property and managing incapacity.

A complete plan can establish who receives assets, who manages finances, and who can make decisions if the owner becomes unable.

These goals remain relevant even when an estate is far below the federal exclusion and is unlikely to owe estate tax.

Planning Beyond Tax Reduction

Trusts can sometimes help manage assets for minors, family members with special circumstances, or beneficiaries who need structured distributions.

Estate documents can also reduce uncertainty by identifying decision-makers and clarifying how property should be handled after death.

For many families, these practical objectives may be more important than federal estate tax avoidance under the 2026 rules.

When Professional Advice May Be Useful

Complex estates can involve businesses, multiple properties, trusts, large investment accounts, or assets located in different jurisdictions.

These circumstances can create legal and tax questions that are difficult to evaluate using the federal exemption amount alone.

An estate attorney, tax professional, or financial advisor can help evaluate how current rules interact with individual goals and assets.

Questions to Bring to an Estate Planning Review

Ask whether existing documents depend on outdated exemption formulas or assumptions about tax rules that did not ultimately take effect.

Also consider whether asset ownership, beneficiary designations, state taxes, or future appreciation could create issues not reflected in current documents.

The review should focus on practical family goals rather than implementing complex strategies simply because they are available.

Frequently Asked Questions About Estate Planning in 2026

Did the federal estate tax exemption fall in 2026? ▼

No. The IRS lists the 2026 basic exclusion amount at $15 million, up from $13.99 million for 2025.

Are estates worth $7 million to $13 million automatically taxable in 2026? ▼

No. Those amounts are generally below the 2026 federal basic exclusion, although state taxes and individual circumstances may still matter.

Should I still review my estate plan if my estate is below $15 million? ▼

Yes. Estate planning also addresses beneficiaries, incapacity, trusts, asset ownership, state taxes, and family objectives beyond federal estate tax.

Does the federal exemption eliminate state estate taxes? ▼

No. State estate and inheritance taxes operate under separate rules and may apply at thresholds significantly below the federal amount.

Can previous sunset planning still be useful? ▼

Possibly. Some gifting or trust strategies may serve valid non-tax objectives, but they should be reviewed using current law and circumstances.

What Happens Now

The feared 2026 federal exemption reduction did not occur, fundamentally changing the outlook for estate planning.

With a $15 million basic exclusion in 2026, many estates below $13.6 million face less immediate federal estate tax exposure than previously projected.

Regular reviews remain valuable because laws, asset values, family circumstances, and state-level rules can all change over time.