The $15 Million Estate Exemption Is Permanent — Now What? How to Rethink Your Estate Plan Under the OBBBA

 
Key Points:

• The federal estate and gift tax exemption is now $15 million per person ($30 million for married couples), effective January 1, 2026.
• The increase is permanent with no sunset provision and is indexed for inflation starting in 2027.
• The GST tax exemption also rises to $15 million but is not portable between spouses.
• Gifts made under the prior TCJA exemption remain valid with no clawback risk.
• Estates below the federal threshold should prioritize basis step-up planning and state-level tax exposure.
• Annual gift tax exclusion increases to $19,000 per recipient in 2026.
• Estate plans built around the TCJA sunset should be reviewed and potentially updated to reflect the new permanent framework.

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The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, permanently raised the federal estate and gift tax exemption to $15 million per individual ($30 million for married couples) beginning January 1, 2026. The exemption is indexed for inflation starting in 2027. Unlike the Tax Cuts and Jobs Act of 2017, the OBBBA contains no sunset provision — meaning this higher exemption is now a permanent feature of the tax code unless future legislation changes it.

For high-net-worth families who spent years planning around an expected exemption reduction, the landscape has fundamentally shifted. The deadline is gone. The exemption is larger. And many estate plans built around urgency may no longer fit the environment they were designed for.

That doesn’t mean estate planning is less important. The OBBBA creates new opportunities and new questions that deserve serious attention, particularly for families with significant or growing wealth.

What Changed Under the OBBBA Estate Tax Provisions?

The TCJA temporarily doubled the estate and gift tax exemption to approximately $10 million per person (reaching $13.99 million in 2025 after inflation adjustments). That increase was scheduled to expire on December 31, 2025, which would have dropped the exemption to roughly $7 million per person.

The OBBBA replaced that temporary increase with a permanent one. Here are the key changes:

• The federal estate and gift tax exemption rises to $15 million per individual ($30 million for married couples) effective January 1, 2026.
• The generation-skipping transfer (GST) tax exemption also increases to $15 million, aligned with the estate and gift tax exemption.
• Beginning in 2027, both exemptions are indexed annually for inflation, using 2025 as the base year.
• The 40% federal estate tax rate remains unchanged for amounts above the exemption. Portability rules are unchanged — a surviving spouse can still use a deceased spouse’s unused exemption, but must file an estate tax return to elect it.
• The annual gift tax exclusion increases to $19,000 per recipient in 2026.
• The GST exemption is not portable between spouses, unlike the estate tax exemption.

These provisions eliminate the “use it or lose it” pressure that drove much of the estate planning activity in 2023 through 2025.

Do I Need to Update My Estate Plan After the OBBBA?

Yes — even though the exemption increased, most estate plans created in the past several years were designed around assumptions that no longer hold. Specifically, plans built to address the expected sunset of the TCJA may include structures, gifting strategies, and trust provisions that were optimized for a very different tax environment.

Families should review their estate plans if any of the following apply: they made large lifetime gifts in 2023–2025 to lock in the TCJA exemption before the expected sunset; they established irrevocable trusts (particularly SLATs, GRATs, or ILITs) specifically to capture the higher exemption; their estate is now below the $15 million exemption threshold when it was previously above or near the old threshold; they own appreciated assets that were transferred to irrevocable trusts where basis step-up may have been forfeited; or they own property or have beneficiaries in states that impose their own estate or inheritance taxes.

A review doesn’t necessarily mean unwinding prior planning. In many cases, the existing structures remain sound. But confirming that your plan reflects the current law — rather than the law everyone expected — is a prudent step.

What Happens to Gifts I Already Made Before the OBBBA?

Gifts made under the higher TCJA exemption remain valid and properly sheltered. The IRS confirmed through regulations finalized in 2019 (the “anti-clawback” rule) that taxpayers who used the temporarily higher exemption for lifetime gifts would not face adverse consequences if the exemption later decreased. With the exemption now permanently increased rather than decreased, this concern is entirely moot.

More importantly, if you previously used most of your exemption through lifetime gifts, the OBBBA’s higher $15 million threshold means you likely have additional exemption capacity. For example, someone who gifted $12 million in 2024 when the exemption was $13.61 million now has a 2026 exemption of $15 million — meaning approximately $3 million in additional lifetime exemption is available.

This is worth a conversation with your advisor to determine whether additional strategic gifting makes sense for your situation.

Should I Still Do Estate Planning If My Estate Is Under $15 Million?

Absolutely. The $15 million exemption eliminates federal estate tax exposure for many families, but estate planning encompasses far more than tax minimization. Families with estates below the federal threshold should focus on several areas that remain critical regardless of exemption levels.

Maximizing the step-up in basis is perhaps the most significant planning opportunity for estates below the threshold. When assets pass through your estate at death, heirs generally receive a “stepped-up” cost basis equal to fair market value at the date of death. This eliminates capital gains tax on all appreciation that occurred during the owner’s lifetime. For a family with a portfolio of highly appreciated stocks or real estate, the step-up could save heirs hundreds of thousands of dollars.

If appreciated assets were previously transferred into certain irrevocable trusts to reduce the taxable estate — a strategy that made sense when the exemption might be halved — the step-up in basis may have been forfeited. With the higher exemption now permanent, some families should evaluate whether keeping appreciated assets inside their taxable estate produces a better overall tax result.

State-level estate taxes continue to apply regardless of federal exemption levels. Twelve states and the District of Columbia impose their own estate taxes, often with exemption thresholds well below the federal level. Texas residents benefit from having no state estate or inheritance tax, but families who own property in states like New York, Illinois, Massachusetts, or Washington — or who have children and beneficiaries living in those states — should account for potential state-level exposure.

Wealth transfer, family governance, and asset protection remain essential components of any estate plan, independent of tax considerations. Powers of attorney, healthcare directives, guardianship designations, trust structures for minor beneficiaries, and business succession planning serve purposes that have nothing to do with the estate tax exemption.

How Does the OBBBA Affect Generation-Skipping Trust Planning?

The OBBBA raised the GST tax exemption to $15 million per person, aligned with the estate and gift tax exemption. This creates expanded opportunities for multigenerational wealth transfer — passing assets to grandchildren, great-grandchildren, or dynasty trusts without incurring the additional 40% GST tax.

One critical distinction: unlike the estate tax exemption, the GST exemption is not portable between spouses. When the first spouse dies, any unused GST exemption does not automatically transfer to the surviving spouse. This makes it essential for married couples to plan proactively, ensuring each spouse’s GST exemption is properly allocated during life or at death.

Dynasty trusts, designed to hold and grow assets across multiple generations while remaining outside the taxable estates of descendants, become even more powerful with the higher exemption. A married couple that funds a dynasty trust with $30 million in combined GST exemption in 2026 could potentially shelter substantial growth from transfer taxes for generations. Depending on the trust’s investment performance, this could represent tens of millions — or more — in long-term tax savings for the family.

What Annual Gifting Strategies Still Make Sense in 2026?

The annual gift tax exclusion stays at $19,000 per recipient in 2026. This means each person can give up to $19,000 to any number of individuals each year without using any lifetime exemption or filing a gift tax return. For married couples, gift-splitting effectively doubles this to $38,000 per recipient.

For a married couple with three children and six grandchildren, consistent annual gifting transfers $342,000 per year completely outside the estate — with no impact on their $30 million combined lifetime exemption. Over a decade, that’s $3.42 million transferred free of any transfer tax, plus all growth on those assets after the gifts are made.

With the urgency of the TCJA sunset behind them, some families may be tempted to slow down their gifting programs. That’s understandable, but premature. Consistent annual gifting remains one of the most effective, low-risk strategies for reducing a taxable estate over time, particularly for families whose estates are above the exemption threshold or who expect significant future asset appreciation. The compounding benefit of annual gifting grows more valuable with every passing year.

Is the $15 Million Exemption Truly Permanent?

The OBBBA exemption is permanent in the sense that it contains no scheduled expiration date — a meaningful distinction from the TCJA, which included a hard sunset. However, “permanent” in tax law means “until Congress changes it.” Future administrations and future Congresses retain full authority to amend estate tax provisions. Political dynamics shift, budget pressures mount, and the same exemption that was doubled in 2017, nearly halved in 2026, and then permanently increased could be revised again.

This is why flexibility remains the cornerstone of sound estate planning. Structures that include trust protector provisions, powers of appointment, and decanting authority give families the ability to adapt when the rules change — whether that change comes in two years or twenty. Plans designed with built-in flexibility are far more durable than plans optimized for a single moment in tax law.

What 50 Years of Tax Changes Have Taught Us

At Carter Financial Management, our team has guided clients through every major estate tax reform since the firm’s founding in 1976. Over five decades of practice in Dallas, we’ve watched exemptions rise and fall, rates climb and retreat, and planning strategies come in and out of favor — from the Economic Recovery Tax Act of 1981 through the TCJA of 2017 and now the OBBBA of 2025.

Through every one of these shifts, the families who fared best were those who planned deliberately, built flexibility into their structures, and worked with advisors who understood how to adapt a plan without abandoning its foundation. The specific numbers change. The principles don’t.

If your estate plan was built around a sunset that never arrived, or if you’re wondering how the new $15 million exemption changes your strategy, now is an excellent time for a conversation. Not because there’s a deadline — for the first time in years, there isn’t one. But because the best planning happens when you have time to think clearly, weigh your options carefully, and make decisions that reflect your family’s values and goals rather than the pressure of an expiring tax provision.

We invite you to contact our team to schedule a review of your estate plan in light of the OBBBA changes. Whether you need to revisit trusts established under the old rules, explore new gifting strategies, or simply confirm that your current plan still fits, our CERTIFIED FINANCIAL PLANNER® professionals are here to help.

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This content was created with the assistance of artificial intelligence (AI). While efforts have been made to ensure the quality and reliability of the content, it is important to note that AI-generated content may not always reflect the most current developments or nuanced human perspectives.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Joe Meylor, CFP®, CPWA® and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.