Beginning January 1, 2026, the federal lifetime estate tax exemption rises to $15 million per individual and $30 million for married couples, indexed annually for inflation. The change comes from the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, and it is the largest single increase to the exemption in decades. Per Mercer Advisors’ 2026 estate planning guide and Cannon Financial Institute, the exemption replaces what would have been a sunset back to roughly $7M-$8M per individual under prior law.
For high-net-worth clients and the advisors who plan around them, this is a planning reset. Strategies built around the prior $13.61M (2025) ceiling — and especially strategies built around the assumed 2026 sunset — need a careful rewrite. Here is what changed, what stays the same, and the moves that deserve immediate attention.
What OBBBA actually did
Three federal estate-and-gift tax changes landed in 2026.
Lifetime exemption: $15M per individual. Up from $13.61M in 2025. Married couples can effectively shield $30M with proper portability elections.
Annual gift exclusion: $19,000 per recipient. Up from $18,000 in 2025. The annual exclusion is unchanged in concept but indexed for inflation. A married couple electing to “split” gifts can give $38,000 per recipient per year without using any lifetime exemption.
Generation-skipping transfer (GST) exemption: $15M. Aligned with the basic exemption. The GST exemption applies to transfers that skip a generation — typically grandparent-to-grandchild gifts or transfers to dynasty trusts.
The federal estate tax rate above the exemption remains 40%. State-level estate or inheritance taxes still apply in roughly a dozen states, and those exemptions are typically lower (Massachusetts and Oregon at $1M, Illinois at $4M, etc.). The OBBBA increase does not affect state-level planning.
Why the prior planning playbook needs an update
For most of 2024 and the first half of 2025, the dominant high-net-worth planning theme was “use it or lose it.” The exemption was scheduled to roughly halve in 2026, so advisors pushed clients to make large gifts before the deadline to lock in the higher exemption. Many clients did. Many trusts were funded. Many irrevocable transfers happened that would not have happened on a normal cadence.
OBBBA invalidated the deadline. The exemption did not sunset. Clients who made aggressive 2024-2025 gifts to “use” the exemption now have transferred wealth that, in retrospect, could have stayed in the estate without tax consequence. They cannot undo those gifts. Irrevocable transfers are, definitionally, irrevocable.
This produces three categories of clients in 2026:
- Clients who gifted aggressively in 2024-2025: the gifts are done. The planning conversation now focuses on what to do with the assets that remain in the estate, and whether the gifted assets are positioned correctly inside trusts.
- Clients who deferred gifting waiting for clarity: the higher exemption is now law. These clients have $15M-$30M of headroom to use deliberately rather than under deadline pressure. The cadence of gifting, the choice of assets to gift (low-basis vs. high-basis, growth-prone vs. income-producing), and the trust structures used can be optimized rather than rushed.
- Clients between $7M and $15M of net worth: these clients faced a real estate-tax problem under the assumed sunset. They no longer face that problem under OBBBA. The planning conversation shifts from “shrink the estate” to “optimize the estate” — focused on income tax efficiency, basis step-up at death, and Roth conversions rather than aggressive gifting.
The planning moves that deserve immediate attention
Five conversations to have with clients during 2026.
1. Re-evaluate funded irrevocable trusts
Clients who funded SLATs, GRATs, or irrevocable insurance trusts in 2024-2025 should review the funding decision with fresh eyes. The assets are still in those trusts. The question is whether the trust structure is the right vehicle for those assets going forward, and whether asset location within the trust (high-growth vs. income-producing, taxable vs. tax-deferred) is optimized for the new exemption.
For SLATs in particular, the spousal access feature was attractive when the goal was to use exemption before sunset. With no sunset, the question is whether the loss of basis step-up on those assets is worth the estate tax shield they no longer materially need. For a client below the new $30M couple exemption, the answer is often “no.”
2. Reconsider gifting cadence
A client with $20M of net worth and a $30M couple exemption no longer needs to gift aggressively to manage estate tax. The right cadence is annual exclusion gifts ($19K per recipient), strategic use of the lifetime exemption for specific objectives (funding a 529 super-fund, equalizing inheritances, supporting a business succession), and taxable gifts only when there is a non-tax reason to make them.
The mistake to avoid is continuing the pre-OBBBA aggressive gifting playbook out of habit. Each gift permanently transfers the basis-step-up opportunity along with the asset.
3. Run portability elections carefully
For married couples, the deceased-spouse-unused-exemption (DSUE) portability election remains critical. When the first spouse dies, the surviving spouse can absorb the unused exemption — but only if a complete and timely Form 706 estate tax return is filed within nine months of death (or 15 months with extension). With $15M individual exemptions, the temptation is to skip the 706 filing because no tax is due. That is a mistake. Even with no tax due, filing for portability preserves the option, and the option matters if the surviving spouse’s estate grows.
4. Optimize basis step-up
The single most underutilized planning tool in 2026 is the basis step-up at death. Every appreciated asset held until death by a U.S. taxpayer receives a stepped-up cost basis to the date-of-death fair market value, eliminating embedded capital gains tax for the heir.
For clients below the new exemption, this is more valuable than estate tax shielding. Holding low-basis appreciated stock until death rather than selling it during life or gifting it can save more in capital gains tax than the estate would have owed in estate tax under the old regime. The planning conversation flips: instead of “how do we get assets out of the estate,” it becomes “how do we get the highest-basis-gain assets into the estate.”
5. Coordinate with SALT and state estate planning
OBBBA also raised the State and Local Tax (SALT) deduction cap to $40,400 in 2026, phased out above MAGI of $500,000-$505,000, and effective through 2029. Per Fidelity’s 2026 tax guide, this creates new itemization opportunities for high earners in high-tax states.
State-level estate and inheritance taxes are unaffected by OBBBA. A New York client with a $10M estate is well below the $15M federal exemption but at risk under New York’s $7.16M state-level exemption. Federal planning that relaxes the gifting urgency must be paired with state-level planning that may still require it. The combination is more nuanced in 2026 than it was under the assumed-sunset planning.
How this connects to retirement and Roth strategy
The OBBBA exemption increase interacts with the broader 2026 tax framework we have been documenting. The Roth catch-up mandate for high earners changes withholding mechanics. The $6,000 senior bonus deduction reshapes withdrawal sequencing. The OBBBA permanent extension of the 2017 brackets removed the urgency from Roth conversion ladders.
Together, these changes redirect the planning conversation toward:
- Roth conversion optimization at the individual level
- Estate planning that emphasizes basis step-up rather than aggressive transfer
- Multi-year tax projection that incorporates SALT, AMT, IRMAA, and state-level estate exposure
Practitioners who continue to plan around the assumed 2026 sunset are working from outdated assumptions. The 2026 tax landscape is meaningfully more favorable for HNW clients than the 2024-2025 industry consensus expected.
Three questions to bring to the next planning meeting
For advisors with HNW clients:
Have any clients made aggressive 2024-2025 gifts based on the assumed sunset, and what is the right post-OBBBA conversation with them?
Does the firm’s estate planning template still default to aggressive lifetime exemption use, or has it been updated to balance estate tax shielding against basis step-up?
For clients in the $7M-$15M band, has the planning theme shifted from “shrink the estate” to “optimize the estate” with income tax and basis-step-up as the new focus?
The $15M exemption is more than a number on a page. It is a structural shift in how high-net-worth planning gets done. The advisors who update their playbooks first capture the value. The ones who don’t continue executing strategies that no longer fit the law.
Sources: Mercer Advisors on 2026 estate tax exemption; Cannon Financial Institute on 2026 estate planning; Legacy Wealth Management on 2026 estate planning; Baird’s 2026 Planning Outlook; AdvisorHub on 2026 tax strategy; Fidelity 2026 tax tips.
