Estate Tax Changes: A Game-Changer

The recently signed "One Big Beautiful Bill Act" has delivered the most significant estate tax relief in decades, permanently increasing the federal estate and gift tax exemption to $15 million per individual starting January 1, 2026.

The New Exemption

The federal estate and gift tax exemption increases to $15 million per individual, or $30 million for married couples using portability. This exemption will be indexed for inflation, continuing to grow over time.

Planning Certainty at Last

Perhaps more valuable than the higher exemption is the permanence of this provision. For years, families have struggled to plan around sunset provisions and potential exemption reductions. That uncertainty is now resolved.

Who's Affected

Estates under $30 million (for married couples) can now be passed to heirs completely free of federal estate tax. Only the wealthiest 0.1% of Americans will face estate tax liability.

However, state estate taxes still apply in many jurisdictions with much lower exemptions. Maryland, for example, maintains a $5 million state exemption. Multi-state planning remains important.

Planning Strategies

Simplification: Some estate plans designed primarily to avoid estate tax can now be simplified, reducing administrative complexity.

Basis Step-Up: With estate tax less of a concern, the basis step-up at death becomes more valuable. Holding appreciated assets until death rather than gifting during life may be preferable.

Income Tax Planning: Estate planning shifts focus from transfer tax minimization to income tax optimization across generations.

Review Your Documents

Estate plans drafted when exemptions were lower may contain provisions that no longer serve your goals. Schedule a review with your estate planning attorney and CPA.