Recent legislation answers a huge estate planning question: the federal estate tax exclusion limit will be extended.
When an individual dies, the owned assets are generally referred to as the “estate.” Settling the estate – either through the court-supervised probate process or by distribution through a trust – raises potential tax issues. Every estate is liable for different types of taxes, including federal estate tax.
Federal estate tax is a tax on the transfer of property at death and is levied on the total value of assets in the estate. Federal estate tax is applied to estates that exceed the lifetime estate tax exemption, also called the “unified credit.” In 2017, legislation increased the federal estate tax exemption amount to $10,000,000, adjusted for inflation.
The exemption amount for federal estate tax in 2025 is $13,990,000. If the estate is less than $14 million, no federal estate tax is due and no return has to be filed. However, this increase was set to end – and roll back to $5,000,000 – at the end of 2025.
New legislation extends the exclusion amount. Effective January 1, 2026, the federal estate tax exemption will increase to $15,000,000 per person. The enactment of this legislation has prevented a decrease in the basic exclusion amount that would have automatically occurred on January 1, 2026 if this legislation had not been passed, because of an automatic sunset (expiration) date that was inserted into Code section 2010(c) in 2017, when the Tax Cuts and Jobs Act was enacted.
This means that in 2026 an individual can transfer $15,000,000 (increased from $13,990,000 in 2025) free of any federal estate, gift, or generation-skipping taxes. A married couple can transfer a combined $30,000,000, increased from $27,980,000 in 2025. This amount is subject to an annual cost-of-living adjustment, so the $15,000,000 limit may adjust upwards in the future.
This extension of the federal estate tax exclusion will prevent individuals from having to radically re-think their estate plans before the end of the year. It also offers an opportunity for better planning for individuals and couples who want to ensure that their family will inherit a legacy that they can preserve for the future. Consult with an attorney who is experienced in estate planning to determine how these changes can benefit you.