The federal estate tax exemption is set to be cut nearly in half in 2026. Here is what this means for your family and the strategies you must implement now.
The federal estate tax exemption — currently $13.61 million per person ($27.22 million per married couple) — is scheduled to revert to approximately $7 million per person (inflation-adjusted) on January 1, 2026, unless Congress acts. Families with estates above the new threshold must act now to use the current higher exemption before it expires.
The One Big Beautiful Bill Act (OBBBA) of 2026 doubled the federal estate tax exemption. But this increase was temporary — it was extended under the OBBBA through December 31, 2033. If Congress does not extend it, the exemption will drop back to its pre-2018 level, adjusted for inflation — approximately $7 million per person.
This means that families who were previously below the estate tax threshold may suddenly face a significant estate tax bill. The top estate tax rate is 40%. The IRS has confirmed that gifts made using the higher exemption before any future legislative changes will not be 'clawed back' — meaning you can lock in the higher exemption by making gifts now.
Most families with estates between $7 million and $13.61 million have done nothing to prepare for the 2026 sunset. Many are not even aware it is happening. Financial advisors and estate planning attorneys are overwhelmed with clients who need to act quickly. The window for implementing the most effective strategies — particularly large gifts to irrevocable trusts — is closing rapidly.
Failure to act before December 31, 2025 could result in a 40% estate tax on assets above the new lower exemption.
A married couple with a $20 million estate could face an additional $2.4 million in estate taxes if they do not use the current higher exemption.
Some strategies — like funding a Spousal Lifetime Access Trust (SLAT) — take time to implement and require careful planning.
Making large gifts without proper planning can trigger gift tax issues or inadvertently disqualify assets from the step-up in basis at death.
State estate taxes may apply at lower thresholds — many states have exemptions of $1–$2 million.
Waiting for Congress to act is a risky strategy — there is no guarantee of an extension.
The Mini Family Office model treats the 2026 sunset as a planning emergency. A coordinated team — estate planning attorney, CPA, and financial advisor — works together to identify the optimal gifting strategy for each family. This may include funding irrevocable trusts, making direct gifts, establishing GRATs, or implementing other advanced strategies — all designed to lock in the current higher exemption before it expires.
The 2026 sunset creates a unique opportunity to combine estate tax planning with charitable giving. A Charitable Lead Annuity Trust (CLAT) can reduce the taxable estate while providing income to a charity for a fixed term. A private foundation can receive a large gift that uses the current exemption while providing ongoing charitable deductions. The Law & Tax Foundation model recommends that every family with a taxable estate consider a charitable giving component as part of their 2026 planning strategy.
Spousal Lifetime Access Trust (SLAT) — an irrevocable trust that removes assets from the taxable estate while allowing the spouse to benefit
Grantor Retained Annuity Trust (GRAT) — transfers appreciation out of the estate with minimal gift tax cost
Irrevocable Life Insurance Trust (ILIT) — removes life insurance proceeds from the taxable estate
Dynasty Trust — transfers assets to multiple generations while minimizing estate and GST taxes
Direct Gifts — using the annual exclusion ($18,000 per recipient in 2024) and lifetime exemption
Qualified Personal Residence Trust (QPRT) — removes the family home from the taxable estate
Family Limited Partnership (FLP) — transfers business and investment assets with valuation discounts
Charitable Lead Annuity Trust (CLAT) — combines charitable giving with estate tax reduction
Access our full research library for case law, IRS codes, and government sources supporting this topic.
View ResearchIf your estate may be affected by the 2026 sunset, time is critical. Our free pro bono assessment will help you understand your exposure and identify the strategies that are right for your situation. Do not wait — the window is closing.
Calculate your current estate value — include all assets, life insurance, retirement accounts, and business interests.
If your estate exceeds $7 million (or $14 million for married couples), consult an estate planning attorney immediately.
Consider funding an irrevocable trust before December 31, 2025 to lock in the current higher exemption.
Review your life insurance — large policies may push your estate above the new threshold.
Coordinate with your CPA to understand the income tax implications of any gifting strategy.
Do not wait for Congress to act — implement your plan now and adjust if the law changes.
Contact all clients with taxable estates immediately — the 2026 sunset requires urgent action.
Prioritize SLAT planning for married couples — it is one of the most effective strategies for using the current exemption.
Coordinate with the client's financial advisor and CPA to ensure the gifting strategy is integrated with the overall financial plan.
Document the planning rationale carefully — the IRS has indicated it will scrutinize large pre-sunset gifts.
Consider the step-up in basis implications of any gifting strategy — some assets are better kept in the estate for the step-up.
Use AI-assisted research tools to stay current on IRS guidance and legislative developments.
Estate Planning Hotline — c/o Estate Law Training Center / Law & Tax Foundation
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