The One Big Beautiful Bill Act established a higher baseline federal estate and gift tax exemption starting in 2026 — commonly cited at roughly $15M per individual / $30M per married couple — averting the scheduled reversion to pre-2018 levels.
For high-net-worth families, that means continued opportunity for lifetime gifting and trust funding, but it also means many existing estate documents were drafted for a very different tax environment.
What Changed for the Estate and Gift Tax Exemption in 2026?
Under prior law, the doubled exemption created by the 2017 Tax Cuts and Jobs Act was scheduled to sunset at the end of 2025, cutting the amount each person could pass on tax-free roughly in half. OBBBA canceled that sunset and instead established a new, elevated exemption baseline, indexed for inflation annually.
- The exemption did not revert to pre-2018 levels as previously scheduled
- The new baseline is commonly cited at roughly $15M individual / $30M per couple, indexed annually for inflation (confirm the current-year figure with your advisor before finalizing any gifting plan)
- Portability between spouses remains available, so a married couple can generally combine both exemptions with proper timely elections
- State-level estate taxes still apply in certain jurisdictions with lower thresholds than the federal limits.
Do Existing Estate Documents Still Work at the New Exemption Level?
This is one of the most common questions coming up in estate planning conversations right now, and it’s a good one.
Many wills and trusts include “formula clauses” — provisions that automatically allocate assets based on the federal exemption amount in effect at death. Those formulas were often drafted assuming a much lower number. With the exemption now elevated, a formula clause that once split an estate sensibly between a family trust and a marital trust can produce a very different, and sometimes unintended, result today.
- Formula clauses deserve a fresh look, not just a “still valid” assumption
- Reassessing the projected growth of illiquid assets — closely held businesses, real estate — inside versus outside the taxable estate is now a bigger factor in that same review
- Some states still impose their own estate tax even where federal exposure has eased, so the location of assets and residency both still matter
Does an Elevated Exemption Mean Estate Planning Is Less Urgent?
It’s tempting to read “statutorily permanent” as “settled,” but for HNW families the planning conversation doesn’t stop there.
Income tax basis planning, generation-skipping considerations, and the possibility of future legislative change all still matter, and a higher federal exemption doesn’t automatically simplify a family’s overall estate picture — particularly for families with concentrated business interests or real estate.
What About the Generation-Skipping Transfer (GST) Tax Exemption?
The GST exemption moves in step with the estate and gift exemption, which means families using dynasty trusts or other multi-generational structures now have a larger base amount available to work with under current law.
For families already funding these structures, this is a natural point to revisit funding levels.
Should We Gift Now, or Hold Exemption for Later?
It’s a fair question, and there isn’t a single right answer for every family.
Gifting appreciating assets now can remove future growth from the taxable estate (although carryover basis rules apply); holding exemption in reserve preserves flexibility if circumstances or the law change again. The right call generally depends on the asset’s expected growth, the family’s liquidity needs, and how much of the exemption a family is comfortable committing irrevocably.
How Should HNW Families Use the New Exemption Level?
- Revisit lifetime gifting plans — an elevated exemption changes the math on gifting appreciating assets out of the estate now versus later
- Review irrevocable trust structures (SLATs, GRATs, IDGTs, dynasty trusts) to confirm funding still matches the current exemption environment
- Consider intra-family loans at the Applicable Federal Rate (AFR) as a lower-friction way to shift future appreciation without using exemption at all
- Consider transferring interests in a family business or investment entity while valuation discounts and the exemption level both remain favorable
- For California families, factor in Prop 13-protected real estate separately — a transfer that makes sense from an estate-tax perspective can still trigger a property-tax reassessment if it isn’t structured carefully
What About Liquidity for the Estate Tax That’s Still Due?
Even with a higher exemption, families above the threshold still face real liquidity questions — an estate tax bill generally comes due before an illiquid business or property can be sold in an orderly way.
Life insurance held inside an Irrevocable Life Insurance Trust (ILIT) is a common way to fund that gap outside the taxable estate itself, and business owners may also have the option to pay estate tax attributable to a closely held business in installments under Internal Revenue Code Section 6166 rather than all at once.
Sizing either of these correctly depends on the specific numbers, not a rule of thumb.
How Does Estate Coordination Fit Falcon’s Family Office Model?
An estate plan that isn’t coordinated with the rest of a family’s tax and investment strategy tends to underperform one that is — and that’s even more true now, with formula clauses, gifting decisions, and liquidity planning all moving at once.
At Falcon Wealth Planning, estate coordination sits alongside comprehensive tax planning and low-cost, evidence-based investing, reviewed as one plan rather than four separate conversations, including how and when to bring the next generation into the discussion.
Frequently Asked Questions
Did the estate tax exemption go away or get reduced in 2026?
No — OBBBA established a higher exemption baseline under current law rather than allowing it to revert to pre-2018 levels as previously scheduled.
Do I still need an estate plan if the exemption is higher?
Yes. A higher exemption reduces federal estate tax exposure for many families, but income tax basis planning, generation-skipping strategy, and family-specific goals still require an active plan.
Does California have its own estate tax?
California does not currently impose a separate state estate tax, though other state-level tax and property-tax issues, including Prop 13 reassessment rules, still need to be factored into any transfer strategy.
How often should our estate plan be reviewed given these changes?
An annual review is a reasonable baseline for HNW families, with an additional check-in any time there’s a meaningful change in asset values, family circumstances, or tax law.
How much life insurance do we need to cover a potential estate tax bill?
It depends on the size of the estate above the exemption and the mix of liquid versus illiquid assets — this is a calculation worth doing with your advisor and attorney together rather than estimating on your own.
Schedule a No-Cost Financial Assessment
Schedule a No-Cost Financial Assessment with Falcon Wealth Planning’s CFP® and CPA team to review whether your estate plan is still aligned with the current exemption environment.
Disclosure
This article is for general educational purposes only and does not constitute individualized tax or legal advice. Exemption amounts are indexed annually and subject to change; consult your estate planning attorney and CPA regarding your specific situation. Falcon Wealth Planning, LLC is a fee-only, fiduciary Registered Investment Adviser based in Ontario, California.
