In This Post
- The Estate Tax Exemption Is Now Permanent
- 2026 Exemption Amounts: $15M Individual, $30M Couple
- The Original Sunset Has Been Eliminated
- No More “Use It or Lose It” Pressure
- Gift Tax Annual Exclusion for 2026
- Estate Tax Rate: 40% Above the Exemption
- Unified Estate and Gift Tax System
- Who Needs Estate Planning
- The Lifetime Exemption Strategy
- Basis Step-Up at Death
- State Estate Tax Considerations
- Comparing Estate Plans from Pre-2026
The Estate Tax Exemption Is Now Permanent
The most significant change for estate planning in 2026 is the permanence of the federal estate tax exemption. The original Tax Cuts and Jobs Act (TCJA) scheduled a sunset on December 31, 2025, reverting exemptions from $13.61 million to approximately $7 million.
This sunset has been eliminated. The $15 million per individual exemption continues indefinitely, indexed for inflation. This represents the most generous estate tax exemption in modern history.
Critical change: The “use it or lose it” urgency that defined estate planning for 2024-2025 no longer exists. Individuals who made large gifts or created GRATs and other strategies to utilize 2025 exemptions did so under outdated information.
What This Means for Your Estate
For most Frisco families, the estate tax exemption sunset elimination removes significant planning pressure. However, estate planning remains critical for other reasons:
- State estate taxes: Some states still impose estate taxes with lower exemptions
- Efficient wealth transfer: Proper planning reduces administration costs and delays
- Asset protection: Trusts and other structures protect assets from creditors
- Charitable giving: Tax-efficient charitable strategies require proper structuring
- Business succession: Family business continuation requires documented plans
- Probate avoidance: Trusts transfer assets outside probate efficiently
TaxLogix, staffed with CPAs and Certified Financial Planners, helps families structure estates for maximum efficiency and minimum tax impact.
2026 Exemption Amounts: $15 Million Individual, $30 Million Married Couple
The federal estate tax exemption for 2026 is established at $15 million per individual. For married couples, this effectively doubles to $30 million if both spouses properly utilize exemptions through portability elections.
2026 Estate Tax Exemptions:
- Single individual: $15,000,000
- Married couple with portability: $30,000,000
- Annual adjustment: Indexed for inflation (likely $15,150,000+ in 2026)
How Much Is Actually Exempt
The exemption applies to the total of:
- Assets passing at death
- Cumulative taxable gifts made during lifetime
- Assets in certain irrevocable trusts
For example, an individual who gave away $3 million during life has $12 million exemption remaining for estate purposes. Gifts and estate transfers use the same unified exemption pool.
Portability Election
Married couples can preserve unused exemptions through portability elections. If one spouse dies, the surviving spouse can elect to preserve unused exemption amount, effectively allowing $30 million combined exemption.
This requires:
- Proper filing of Form 706 (Estate Tax Return) for the deceased spouse
- Timely portability election on Form 706
- Proper beneficiary designations and titling
Guidance: Even if your estate is below $15 million, proper portability planning ensures the surviving spouse can benefit from the deceased spouse’s exemption. TaxLogix coordinates with estate planning attorneys to ensure proper implementation.
The Original Sunset Has Been Eliminated
Before the One Big Beautiful Bill Act (signed July 4, 2025), the TCJA exemption was scheduled to sunset on December 31, 2025. This created a looming deadline that dominated estate planning discussions.
The original sunset would have caused exemptions to revert to approximately:
- Single individual: $7,000,000 (roughly)
- Married couple: $14,000,000
Families with estates exceeding these lower amounts would have faced potential federal estate taxes on the excess. This created artificial urgency to make gifts or implement strategies before 2025.
For Families Who Already Acted
Families who made large gifts in 2024-2025 in anticipation of the sunset should note:
- Gifts are irrevocable regardless of exemption changes
- Gifts reduce the donor’s lifetime exemption but assets transferred are out of the estate
- For appreciating assets, gifts made early provide superior tax results (future appreciation isn’t taxed)
- Lifetime gifts still reduce probate, provide asset protection, and accomplish wealth transfer
The elimination of the sunset doesn’t negate prior strategies—it just removes future deadline pressure.
Looking Forward
With the exemption now permanent and inflation-indexed:
- Estate planning can focus on long-term wealth transfer rather than artificial deadlines
- Charitable giving strategies become more manageable (no rush to execute before sunset)
- Family business succession planning can develop over time rather than accelerated
- Dynasty trusts and generation-skipping strategies can be evaluated based on family goals rather than tax deadlines
No More “Use It or Lose It” Pressure: Planning Based on Goals
The elimination of the sunset fundamentally changes estate planning approach. Previous planning was driven by tax deadlines rather than family goals.
Before 2026, the question was: “How can we use the $13.61 million exemption before it drops to $7 million in 2026?”
In 2026 and beyond, the question becomes: “How should we structure wealth transfer to achieve family goals while minimizing tax?”
Benefits of Deadline-Free Planning
1. Thoughtful Charitable Giving
Families motivated by tax deadlines sometimes rushed charitable commitments. Now, charitable giving can be based on genuine philanthropic goals with tax optimization as a secondary benefit.
2. Family Business Succession
Business succession planning can unfold over the proper timeline rather than forced acceleration. Some families benefit from transitioning business interests gradually; now they can do so without deadline pressure.
3. Wealth Transfer to Heirs
Families can evaluate whether to make lifetime gifts (with annual exclusions) or rely on estate transfer, based on:
- Heir maturity and capability
- Asset appreciation expectations
- Family relationship dynamics
- Creditor protection needs
4. Relationship-Based Timing
Some families benefit from significant wealth transfer events tied to milestones (grandchildren turning 21, business sale, retirement) rather than tax deadlines. This flexibility now exists.
Still Important: Proper Documentation
Even without deadline pressure, proper estate planning documents remain critical:
- Updated wills reflecting current wishes
- Trust structures if desired
- Beneficiary designations on retirement accounts and insurance
- Titling of assets (joint, trust, individual)
- Powers of attorney for financial and healthcare decisions
TaxLogix helps coordinate estate planning documentation through our network of trusted estate planning attorneys and comprehensive review of tax situations.
Gift Tax Annual Exclusion for 2026: $19,000 Per Recipient
The annual gift tax exclusion for 2026 is $19,000 per recipient, an increase from $18,000 in 2025. This amount is adjusted annually for inflation, rounded to the nearest $1,000.
How the Annual Exclusion Works
You can give up to $19,000 per year to any number of recipients without:
- Filing a gift tax return
- Using any of your lifetime exemption
- Creating gift tax liability
Married couples filing jointly can give $38,000 per recipient ($19,000 each), doubling the annual exclusion opportunity.
Strategic Annual Gifting
For families with substantial wealth, annual exclusion gifts are a primary wealth transfer tool:
Example Family Scenario: Parents with $40 million estate want to transfer wealth. They have:
- 3 adult children
- 8 grandchildren
- Spouse
Annual gifts available:
- Couple to each child: $38,000 × 3 = $114,000
- Couple to each grandchild: $38,000 × 8 = $304,000
- Total annual: $418,000
Over 20 years: $8,360,000 transferred tax-free while the donors remain affluent. This reduces the estate by $8.36 million, reducing estate tax exposure while accomplishing wealth transfer goals.
Gift-Splitting Between Spouses
Married couples can “split” gifts, allowing each spouse to use their annual exclusion. This is particularly valuable for gifts from one spouse’s separate property—the other spouse can elect to split the gift, maximizing the annual exclusion.
Important: To split gifts, both spouses must elect gift-splitting on Form 709 (Gift Tax Return), even if no tax is owed. Consult with TaxLogix on proper documentation.
Estate Tax Rate: 40% Above the Exemption
The federal estate tax rate is a flat 40% on amounts exceeding the exemption. This unchanged rate applies to estates above $15 million per individual (or $30 million per married couple).
Understanding the 40% Rate
Estate tax applies only to the excess above the exemption:
Example:
- Single individual’s estate: $20 million
- Exemption: $15 million
- Taxable estate: $5 million
- Estate tax (40%): $2 million
- Net to heirs: $18 million
Without proper planning: The family loses $2 million to federal estate tax.
With proper planning: Strategies like spousal lifetime access trusts (SLATs), charitable remainder trusts, or annual exclusion gifts could reduce or eliminate this tax.
State Estate Taxes Are Additional
Several states impose state-level estate taxes, typically with lower exemptions. These apply in addition to federal estate tax:
States with estate taxes:
- Connecticut, Illinois, Maine, Maryland, Massachusetts, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Washington
Texas advantage: Texas has no state estate tax, providing a significant advantage for Frisco residents. An estate subject to federal tax pays 40% federal only; no additional state tax layer.
Unified Estate and Gift Tax System
The federal estate and gift tax systems are unified, meaning the same $15 million exemption applies to lifetime gifts and transfers at death.
How the Unified System Works
Your $15 million lifetime exemption can be used for:
- Taxable gifts during life (gifts above annual exclusions)
- Estate transfer at death
- Some generation-skipping transfers
Once you’ve used exemption through lifetime gifts, you have less available for your estate at death.
Example:
- Lifetime taxable gifts: $6 million (uses $6M exemption)
- Remaining exemption at death: $9 million
- Estate exceeding $9 million faces estate tax on the excess
Strategic Implications
The unified system means lifetime gifting can be strategic:
Strategy 1: Basis Step-Up Preservation
Assets held until death receive a “step-up” in basis to fair market value. Appreciated assets should generally be held until death to eliminate capital gains taxes, using the exemption for non-appreciating or slowly appreciating assets.
Strategy 2: Appreciating Asset Gifts
Gift rapidly appreciating assets during life (before appreciation occurs) to remove future appreciation from the taxable estate. Frozen-value gifting strategies leverage this.
Strategy 3: Income-Producing Assets
Gift income-producing assets to lower-income-bracket family members, reducing overall family tax burden while utilizing exemptions.
Strategy 4: Charitable Gifts
Gifts to charity are always unlimited and don’t use exemption, making charitable giving complementary to family wealth transfer planning.
Who Needs Estate Planning: Beyond the Exemption
Many Frisco residents believe they don’t need estate planning because their estates don’t exceed the $15 million exemption. This overlooks critical non-tax reasons for planning.
Estate Planning Benefits Beyond Tax
1. Probate Avoidance
Probate is expensive (2-7% of estate value), time-consuming (6 months to 2+ years), and public. Proper planning (trusts, beneficiary designations, joint ownership) avoids probate entirely.
For Frisco example: A $3 million estate costs $60,000-$210,000 in probate fees. Proper planning costs a fraction of this.
2. Asset Protection
Trusts provide creditor protection for heirs. Assets in trusts are protected from:
- Judgments and lawsuits against heirs
- Divorce proceedings
- Creditor claims
3. Incapacity Planning
Wills don’t address incapacity. Powers of attorney are critical for:
- Managing financial affairs if you’re incapacitated
- Making healthcare decisions (living will/HIPAA authorization)
- Authorizing specific persons to act on your behalf
4. Specific Bequests
Wills allow you to:
- Direct specific assets to specific people (sentimental items to particular children)
- Specify guardians for minor children
- Explain your wishes (preventing family disputes)
- Leave educational funds for grandchildren
5. Business Succession
Family business owners need documented succession plans addressing:
- Who manages the business after your death
- How ownership transfers occur
- Tax minimization for the transfer
- Funding mechanisms (buy-sell agreements, life insurance)
6. Blended Family Considerations
Second marriages create complex dynamics:
- Protecting assets for children from first marriage
- Providing for current spouse while protecting assets
- Clear documentation of intentions
The Lifetime Exemption Strategy: Using $15 Million Optimally
With the $15 million exemption now permanent, strategic use becomes important for estates approaching or exceeding this level.
Asset Selection for Gifting
Optimal candidates for lifetime gifts:
- Rapidly appreciating assets (especially concentrated stock or real estate)
- Assets with significant appreciation potential
- Assets generating minimal current income
- Assets held long-term with substantial unrealized gains
Better candidates to hold until death:
- Appreciated assets where basis step-up is valuable (general investments, real estate)
- Assets with modest appreciation
- Assets generating significant income (living trust needs careful design)
The Basis Step-Up Advantage
Assets held until death receive an income tax basis “step-up” to fair market value at death. This eliminates capital gains taxes on appreciation during the owner’s lifetime.
Example of Step-Up Benefit:
- Investment purchased for $100,000
- Appreciated to $500,000 at owner’s death
- Owner’s heirs inherit with $500,000 basis
- Heirs could sell immediately for $500,000 with $0 capital gain
Without lifetime gift (optimal): Heirs get $500,000 with no capital gains tax.
With lifetime gift: If the asset appreciated to $600,000 and then was held until death, heirs get $600,000 with only $100,000 capital gains (on the post-gift appreciation).
For many estates, the capital gains tax savings from basis step-up exceeds the estate tax savings from lifetime giving. This makes holding appreciated assets until death often more efficient.
Discounted Value Gifting
For substantial assets, discounted value strategies can multiply exemption effectiveness:
Family Limited Partnership (FLP) Discounts:
- Create FLP and transfer assets
- Gift limited partnership interests (not voting control)
- Interests are typically valued 20-40% below underlying asset value due to lack of control and marketability
- This “discount” allows transfer of more asset value per dollar of exemption used
Example:
- Contribute $10 million of real estate to FLP
- Limited interest valued at $7 million (30% discount)
- Gift the limited interest (uses $7M exemption)
- Transferred $10 million of assets with $7M exemption
This strategy requires proper structure and documentation. TaxLogix works with estate planning attorneys on these complex strategies.
Basis Step-Up at Death: The Ultimate Tax Benefit
The income tax basis step-up at death is the single largest tax benefit available to wealthy families. Heirs receive inherited assets with a “stepped-up” basis equal to fair market value at the date of death.
How Basis Step-Up Works
Capital Gains Calculation:
- Capital gain = Sale price minus cost basis
- Inherited assets get new basis at death date value
- Eliminates taxation on all appreciation during decedent’s lifetime
Example:
- Parent purchases investment property for $500,000 in 1995
- Property worth $2,000,000 at parent’s death in 2026
- $1,500,000 of appreciation would normally be taxable gain
- Heirs inherit with $2,000,000 basis
- Heirs could sell immediately for $2,000,000 with $0 capital gain
Tax savings: $1,500,000 × 20% (long-term capital gains rate) = $300,000 saved
Strategic Implications
The basis step-up creates important planning priorities:
1. Hold Appreciated Assets Until Death
For most investors, holding appreciated assets until death is more tax-efficient than lifetime gifts. The step-up is an unbeatable tax benefit (permanently removing all prior appreciation from taxation).
2. Rebalance Carefully
Investors holding concentrated positions (single stock, real estate) might want to hold until death rather than rebalance (which triggers capital gains taxes).
3. Insurance for Estate Taxes
The basis step-up doesn’t help if the estate owes estate tax. Life insurance can fund potential estate taxes, preserving both the basis step-up benefit AND preventing forced asset sales.
4. Charitable Giving
Appreciated assets are ideal for charitable gifts (avoid capital gains tax while getting charitable deduction). However, charitable giving requires careful coordination with estate planning goals.
Potential Legislative Risk
Congress has discussed taxing unrealized gains at death, which would eliminate the basis step-up. Current law preserves the benefit indefinitely, but families with large estates should discuss this risk with tax professionals.
State Estate Tax Considerations for Frisco Residents
While Texas has no state estate tax, Frisco residents with multi-state property or heirs in other states should understand state estate tax complexity.
States with State Estate Taxes
Nine states plus Washington, D.C. impose state-level estate taxes:
- Connecticut, Illinois, Maine, Maryland, Massachusetts, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Washington
These states typically have:
- Lower exemptions ($2-6 million)
- Tax rates of 3-16%
- Portability elections (some states)
Texas Advantage
Frisco residents enjoy significant advantages:
- No state estate tax: Even substantial estates escape state-level taxation
- No state income tax: Large distributions from trusts avoid state income tax
- No inheritance tax: Heirs don’t pay state taxes on inheritances
- Planning simplicity: Single-state planning easier than multi-state coordination
Multi-State Planning
Families with property in multiple states need coordinated planning:
Vacation home in another state? Consider:
- Holding in revocable trust (avoids probate)
- Understanding that state’s estate and income tax rules
- Determining whether state estate tax applies
- Coordinating with primary state domicile
Heirs living in different states? Document:
- Your legal domicile (typically residence where you claim homestead exemption)
- Intent to remain in primary state
- Connections to Texas (voting registration, driver’s license, etc.)
TaxLogix helps clients with multi-state property coordinate estate planning with their CPA services and connections to estate planning attorneys.
Comparing Estate Plans from Pre-2026: Should You Update?
Many Frisco families created estate plans in 2023-2025 specifically to utilize exemptions before the anticipated 2025 sunset. With the sunset eliminated, these plans need evaluation.
Plans Created to Use 2025 Exemption
Families who made large gifts or created GRATs in 2024-2025 should understand:
Gifts made cannot be undone. Gifts are irrevocable. If you gave $5 million to children in 2025:
- The gift is permanent
- Assets transferred won’t return to your estate
- You’ve used $5 million of your $15 million exemption
- BUT: The $5 million (plus any appreciation) is out of your estate
This isn’t bad—it’s just permanent. For appreciated assets, getting them out of your estate early (before future appreciation) is often optimal. The step-up limitation is no longer the driving concern.
Plans That May Need Updates
Review existing plans if they include:
1. GRATs Created with Short Terms
Grantor Retained Annuity Trusts (GRATs) designed to use 2025 exemption may have short initial terms. Evaluate:
- Whether extended terms are beneficial
- Impact if grantor dies during GRAT term
- Whether GRAT still serves wealth transfer goals
2. Spousal Lifetime Access Trusts (SLATs)
SLATs funded with 2025 exemption may have beneficiaries and terms no longer optimal. Consider:
- Whether beneficiary list reflects current wishes
- Whether trustee provisions need updating
- Impact of frozen value on growth projections
3. Irrevocable Life Insurance Trusts (ILITs)
ILITs created in 2025 may have been structured around specific exemption amount. Review:
- Whether death benefits still align with estate tax projection
- Whether policy insurance and funding remain appropriate
- Whether trustee and beneficiary designations remain appropriate
4. Dynasty Trusts
Dynasty trusts created to utilize 2025 exemption may have:
- Provisions tied to sunset dates
- State situs decisions no longer appropriate
- Generation-skipping tax elections no longer necessary
Don’t Automatically Recreate Plans
Important: Just because the deadline changed doesn’t mean plans need recreation. Review existing plans with your estate planning attorney to understand:
- Whether changes improve the plan
- Costs of modifications
- Whether existing documents still accomplish goals
- Tax implications of any changes
FAQ: Estate Tax Exemption 2026
Is the $15 million estate tax exemption permanent now?
Yes. The One Big Beautiful Bill Act eliminated the original TCJA sunset, making the $15 million exemption permanent and indexed for inflation. There’s no longer a “use it or lose it” deadline. This exemption applies indefinitely unless Congress changes the law.
Can married couples double the exemption?
Yes. Through portability election, married couples can preserve unused exemptions of both spouses. If one spouse dies without using the full exemption, the surviving spouse can elect portability, preserving that exemption for their estate. This effectively allows $30 million combined exemption.
Do I need to update my estate plan now that the sunset is gone?
Not necessarily. Existing estate plans that utilized the exemption still accomplish their goals. Review your plan with your estate planning attorney to determine whether updates would improve it. Changes aren’t required merely because the deadline changed.
What’s the annual gift tax exclusion for 2026?
The annual gift tax exclusion for 2026 is $19,000 per recipient. Married couples can give $38,000 per recipient ($19,000 each). This allows substantial tax-free wealth transfer each year without using lifetime exemption.
Does Texas have an estate tax?
No. Texas has no state estate tax or state income tax. This is a significant advantage for Frisco residents compared to those living in states with state-level estate taxes. Combined with the federal exemption, Frisco residents enjoy substantial estate tax advantages.
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