Estate Planning and Taxes

From an estate and gift tax perspective, the most significant change OBBBA made is a permanent increase to the estate, gift, and generation-skipping transfer (GST) tax exemption amounts. For 2026, these amounts are $15 million per individual or $30 million for a married couple, to be reviewed annually for inflation adjustments, up from $13.99 million per individual or $27.98 million for a married couple in 2025. The new legislation retains the TCJA-era tax brackets for trusts and estates. This means that for assets transferred during a lifetime or at death with a cumulative value exceeding the exemptions, the marginal tax rate remains 40% of the value over the exemptions.

SPOUSAL EXEMPTION PORTABILITY

If part or all of one spouse's estate tax exemption is unused at that spouse's death, the estate can elect to permit the surviving spouse to use the deceased spouse's remaining exemption. This exemption portability provides flexibility upon the first spouse's death. While a portability- only estate tax return can be filed up to two years from the deceased spouse's death, it can be costly. Be aware that portability is available only from the most recently deceased spouse. It doesn't apply to the GST tax exemption and isn't recognized by many states for estate or inheritance tax purposes.

STATE-LEVEL ESTATE TAX

Even if your estate is no longer subject to federal estate tax, you need to review and coordinate with any estate and inheritance taxes your state may levy. States can impose separate estate taxes with exemption amounts that are significantly lower than the federal level. These lower thresholds mean state estate taxes could apply even when federal estate taxes don't, making state-specific strategies essential for effective estate planning.

GIFT TAXES AND LIFETIME GIVING

The annual gift tax exemption is $19,000 per donor for each recipient in 2026. Amounts over that subtract from your estate tax basic exclusion amount.

If executed properly, paying for a grandchild's or some other person's tuition or medical expenses is an exception to the gift tax. Payments made directly to providers or schools aren't considered gifts.

Consult your trusted advisor to explore these strategies and how they may work for your personal situation.