What Happened to the Estate Tax Sunset? Congress Acted — $15M Is Now Permanent

Short answer: the sunset did not happen. The federal estate and gift tax exemption is $15,000,000 per person for 2026 — $30,000,000 for a married couple using portability — and it is permanent, indexed for inflation from 2027.

Correction notice (updated 30 July 2026). If you arrived here from advice about a 2026 estate tax cliff, that advice is out of date and this page previously repeated it. Earlier versions said the exemption was about $13.9 million and had merely been "extended." Both were wrong: the One Big Beautiful Bill Act raised the exemption to $15,000,000 and removed the expiry date entirely. If you accelerated gifts, funded a SLAT or an irrevocable trust, or bought a life insurance policy sized to a $7 million exemption, none of that was foolish — it was the correct response to the law as it stood. But the premise has changed, and the plan is worth re-checking with your attorney.

What Happened, Precisely

The One Big Beautiful Bill Act (OBBBA), Public Law 119-21, was signed on 4 July 2025. It amended IRC §2010(c)(3) to set the basic exclusion amount at $15,000,000 for 2026 and struck the provision that would have made the doubled exemption expire. The IRS confirmed the figure in Rev. Proc. 2025-32, §.41, which also sets the generation-skipping transfer tax exemption at the same $15,000,000 and states that the amount is adjusted for inflation for calendar year 2027 and future years.

So there is no cliff in 2026, no cliff in 2027, and none scheduled at all. A future Congress can of course change the law again, but that is ordinary legislative risk with no date attached — it is not something you can plan a deadline around.

The Estate Tax Exemption: How It Got Here

The top rate has been 40% throughout and remains 40%.

What the Sunset Would Have Been

This is worth keeping on the record, because it explains why so much 2018–2025 advice reads the way it does.

TCJA §11061 doubled the base exclusion from $5 million to $10 million (both indexed from 2011), but applied that only to estates of decedents dying and gifts made after 31 December 2017 and before 1 January 2026. Absent new legislation, the exemption for 2026 would have snapped back to roughly $7 million per person — a little over half.

Had that happened:

• An estate worth $25 million would have faced 40% tax on $18 million ($25M − $7M), or $7.2 million in federal estate tax, due nine months after death.
• A family business worth $40 million would have faced $13.2 million (40% of the $33 million above the exemption).
• A real estate portfolio worth $50 million would have triggered $17.2 million.

Under the $15 million exemption those same estates owe $4.0 million, $10.0 million and $14.0 million respectively. The saving is the same in every case — $3.2 million — and necessarily so: the exemption is $8 million higher than the reverted figure would have been, and $8 million × 40% = $3.2 million. Above the exemption the rate is flat, so the benefit of a larger exemption is a fixed amount, not a percentage.

For scale: roughly 0.2% of estates pay any federal estate tax at all. Estimates at the time suggested a reversion to $7 million would have multiplied the number of taxable estates several times over. That did not occur.

If You Already Acted on the Sunset

A great deal of planning between 2018 and mid-2025 was built on "use it or lose it." If you were one of those clients, the honest position is this:

• Nothing needs to be undone, and mostly nothing can be. Completed gifts are irrevocable; irrevocable trusts are irrevocable by design.
• The gift still does real work. Every dollar of appreciation after the transfer date sits outside your estate. That benefit never depended on the sunset.
• The IRS anti-clawback regulations (T.D. 9884, 2019) already protected you against a later reduction in the exemption clawing back gifts made under a higher one. With OBBBA the point is moot, but the protection remains.
• What has changed is urgency, and possibly sequencing. If you were part-way through a multi-year gifting programme compressed to beat a deadline, there is no longer a reason to compress it. Spreading it out may now be better for control, for basis planning, and for your own liquidity.
• Some structures were sized to the wrong number. A life insurance policy bought specifically to fund estate tax at a $7 million exemption may now be larger than needed. Do not cancel anything on the strength of a web page — but do put it on the agenda with your adviser.

What Changed and What Didn't Under OBBBA

What Changed:

1. The exemption rose to $15 million per person ($30 million for a married couple), up from $13.99 million in 2025.
2. The expiry date is gone. This is the substantive change: not an extension to a new date, but removal of the date.
3. The GST exemption matches at $15,000,000 for 2026.
4. Indexing continues from calendar year 2027.

What Didn't Change:

1. The 40% rate. Any estate above the exemption still owes 40% federal estate tax on the excess.
2. State estate and inheritance taxes. Twelve states and DC levy an estate tax; five states levy an inheritance tax. Their exemptions are far lower and are entirely independent of the federal figure. OBBBA is federal only.
3. Portability still requires a filing. The deceased spouse's unused exemption does not transfer automatically.
4. Stepped-up basis at death remains in place. This is worth stating plainly because it is widely muddled: the basis step-up under §1014 is long-standing permanent law. It was never a TCJA provision, so it was never scheduled to sunset and OBBBA neither extended nor curtailed it.
5. Valuation discounts for minority interests in LLCs and family limited partnerships remain available.

Who is Actually Affected by Estate Taxes in 2026?

With a $15 million individual exemption, estate taxes affect a very small percentage of Americans:

Wealth levels where estate tax becomes a consideration:

• Net worth $15M–$25M (individual): estate tax is a real possibility but can often be reduced substantially with planning
• Net worth $30M+ (married couple): estate tax is likely without planning
• Business owners: even those under $15M may be affected if the business is valued at a high multiple, or if they live in an estate tax state

Professions/occupations most commonly affected:

• Successful entrepreneurs (founders of tech companies, real estate developers)
• Physicians, dentists, attorneys with high net worth
• Multi-generational family business owners
• Real estate investors with large portfolios
• Investors with significant stock/investment holdings

Demographics: Approximately 99.8% of estates pay no federal estate tax. Only about 3,500 to 6,000 estates annually (out of 2.8 million deaths) file a federal estate tax return, and many of those owe zero tax after utilizing exemptions and deductions.

State Estate and Inheritance Taxes: The Real Threat in 2026

While OBBBA removed the federal cliff, state estate taxes are untouched by it — they have their own exemptions, their own rate schedules, and their own legislatures. For many families with $3M–$15M, the state bill is now the only transfer tax bill.

States with an estate tax (12 states and DC), 2026 exemptions:

States with an inheritance tax (5), paid by the recipient:

• Kentucky (up to 16%; spouses, children, parents and siblings are exempt, and from 1 January 2026 Class B beneficiaries are exempt too)
• Maryland (flat 10%; the only state with both taxes; no inheritance tax if the estate is under $50,000)
• Nebraska (up to 15%, varying by relationship)
• New Jersey (up to 16%; spouses, children, grandchildren and parents are exempt)
• Pennsylvania (0% to spouse, 4.5% to lineal descendants, 12% to siblings, 15% to others)

Recently repealed — do not plan around these: Iowa eliminated its inheritance tax for deaths on or after 1 January 2025. Delaware repealed its estate tax in 2018. New Jersey finished phasing out its estate tax in 2018 and now levies only the inheritance tax. Older articles still list all three.

Two mechanics that catch people out:

The New York cliff. If a New York taxable estate exceeds 105% of the state exemption — $7,717,500 for 2026 — the exemption is lost entirely and the whole estate is taxed, not merely the excess. Estates near that line are worth planning to the dollar.

Graduated rates, not flat ones. Every rate range above is a graduated schedule. The headline figure is the top marginal rate, so estimating a state bill as "amount above the exemption × top rate" substantially overstates it. New York's top rate is 16%, not 40% — the 40% figure belongs to the federal tax and is sometimes mistakenly applied to states. Use your state's own table, or a state-specific calculator.

For these reasons, wealthy residents of estate tax states often consider relocating to states like Florida, Texas, or Nevada before death — though establishing domicile is a factual test, not a matter of filing a form.

Key Estate Tax Concepts to Understand

1. The Annual Exclusion ($19,000 for 2026)

You can give up to $19,000 per person per year ($38,000 if married, splitting gifts) without using any exemption or filing a gift tax return. This is one of the most underutilized tax planning tools.

Example: A couple with three children and five grandchildren can give:

• $38,000 × 8 people = $304,000/year completely tax-free
• Over 20 years = $6.08 million transferred to the next generation tax-free
• This dramatically reduces the taxable estate.

2. Portability: The Spouse's Unused Exemption

When the first spouse dies, the surviving spouse can "inherit" the deceased spouse's unused exemption amount by filing Form 706 (estate tax return) and electing portability. This allows married couples to effectively double their exemption.

Example:

• Spouse A dies in 2026 with $10 million in assets, all passing to Spouse B under the unlimited marital deduction (so no exemption is used)
• Spouse B now has Spouse A's unused $15M exemption AND her own $15M exemption = $30M total
• Spouse B can pass $30 million before owing any federal estate tax

Note that the ported amount is frozen at the deceased spouse's unused exemption — it does not grow with inflation, while the survivor's own exemption does.

3. Irrevocable Life Insurance Trusts (ILITs)

Life insurance proceeds are normally included in your taxable estate. An ILIT is a trust that owns life insurance on you. The proceeds pass outside your estate, providing liquidity to pay estate taxes.

Example:

• You create an ILIT with three beneficiaries holding Crummey withdrawal rights, and gift $19,000/year per beneficiary for 10 years ($570,000 total, all within annual exclusions)
• The ILIT buys a $1 million life insurance policy on you
• When you die, the $1M passes to the ILIT and is NOT included in your taxable estate
• This keeps your estate smaller and avoids estate tax on that $1M

4. Grantor Retained Annuity Trusts (GRATs)

A GRAT is an advanced estate planning technique where you place appreciated assets into a trust for a term (2-10 years). You receive annuity payments during the term, and remaining assets pass to heirs tax-free if you survive the term.

Example:

• You put $5 million of stock in a GRAT for 5 years
• The stock appreciates to $10 million
• You receive annuity payments of about $1 million/year for 5 years
• At the end, the $10 million passes to your children with minimal (or zero) gift tax
• The $5 million appreciation is effectively transferred to the next generation tax-free

5. Charitable Remainder Trusts (CRTs)

A CRT allows you to donate appreciated assets to a trust, receive income for life, and leave the remainder to charity. This generates an immediate charitable deduction, reduces your taxable estate, and avoids capital gains tax on the appreciated assets.

Example:

• You donate $5 million of appreciated real estate to a CRT
• You receive 5% of the trust value annually ($250,000/year)
• Upon your death, the remainder goes to your designated charity
• You get an immediate charitable deduction of approximately $2-3 million
• You avoid capital gains tax on the $3 million appreciation

What You Should Do Now (Action Steps for 2026)

If Your Net Worth is $15M - $25M (Individual) or $30M+ (Married):

1. Calculate your net worth accurately. Include all assets: real estate, retirement accounts, life insurance, business interests, stocks, bonds, and alternative investments. Overvaluation or undervaluation will undermine planning.

2. File a will and durable power of attorney. Don't delay—these documents are foundational. Consult an estate planning attorney licensed in your state.

3. Consider a revocable living trust. In many states, this avoids probate and can provide privacy. It doesn't reduce estate taxes, but it's important for a smooth transition.

4. Implement annual exclusion gifting. Start gifting $19,000/person/year to your children and grandchildren immediately. This is simple and tax-free. Over 10-20 years, you can transfer hundreds of thousands of dollars.

5. Review portability planning. If married, ensure your estate plan provides for portability election and that your executor knows to file Form 706 when the first spouse dies. Even if no tax is owed, the filing preserves portability.

6. Evaluate advanced techniques. If your net worth exceeds $25M, work with a CPA and estate planning attorney to evaluate GRATs, ILITs, family limited partnerships (FLPs), charitable remainder trusts, or donor-advised funds (DAFs).

7. Check state estate taxes. If you live in an estate tax state, consider whether relocating before death makes sense financially.

8. Review beneficiary designations. Life insurance, retirement accounts (IRAs, 401ks), and other accounts pass outside your will via beneficiary designation. Ensure these align with your estate plan.

If Your Net Worth is $5M - $15M:

1. Plan conservatively. Even though you're likely below the current exemption, inflation adjustments and market growth could push you over the line by the time you die.

2. Make annual gifts. Start using the $19,000 annual exclusion now to gradually move wealth to the next generation.

3. Establish a revocable living trust. Even though estate taxes may not be an issue, probate avoidance and privacy matter at this level of wealth.

If Your Net Worth is Under $5M:

1. Focus on basic planning. A will, health care proxy, and power of attorney are essential. Estate taxes are not a concern.

2. Revisit estate planning every 5-10 years. As your wealth grows, update your plan accordingly.

Key Takeaways

1. The sunset did not happen. OBBBA (P.L. 119-21, 4 July 2025) set the exemption at $15 million per person / $30 million per couple and removed the expiry date. It is indexed for inflation from 2027. Advice referring to a 2026 or 2027 cliff, or to a ~$7 million figure, predates the law.

2. Federal estate tax remains a concern for only the wealthiest ~0.2% of Americans, but high-net-worth families should still plan strategically.

3. State estate and inheritance taxes are now the binding constraint for most affected families — twelve states and DC levy an estate tax with exemptions as low as $1 million (Oregon), and five states levy an inheritance tax. These are wholly independent of the federal figure.

4. Annual exclusion gifting ($19,000/person/year, $38,000 for a married couple splitting gifts) is the simplest reduction strategy and needs no election or trust.

5. Advanced techniques (GRATs, ILITs, charitable trusts, FLPs) can dramatically reduce estate taxes for those with net worth over $25 million.

6. Stepped-up basis at death remains in effect. Heirs take assets at fair market value at death, erasing embedded capital gains. This is §1014, long-standing permanent law — it was never part of TCJA and was never scheduled to expire.

If your net worth is above $10 million, consult an estate planning attorney and CPA to implement a comprehensive plan. Removing the deadline removed the urgency, not the value, of planning — and for anyone in an estate tax state, the state exposure did not change at all.

Sources

• Rev. Proc. 2025-32 — §.41 (2026 basic exclusion amount and GST exemption, $15,000,000, indexed from calendar year 2027); §.42 (2026 annual exclusion for gifts, $19,000)
• One Big Beautiful Bill Act, Public Law 119-21 — signed 4 July 2025, amending IRC §2010(c)(3)
• Tax Cuts and Jobs Act, P.L. 115-97, §11061 — the doubled exclusion, applicable only to transfers before 1 January 2026
• T.D. 9884: Estate and Gift Taxes; Difference in the Basic Exclusion Amount — anti-clawback regulations
• Tax Foundation: Estate and Inheritance Taxes by State — state exemptions and rate schedules