Big Estate Tax Changes Could Hit in 2026 and What You Need to Know

Significant federal estate tax changes are coming on January 1, 2026, under the One Big Beautiful Bill Act. The federal estate and gift tax exemption will rise to $15 million per individual (or $30 million per married couple), offering new planning opportunities. These exemption amounts are indexed for inflation, meaning they may increase slightly in future years.

 

The top federal estate tax rate will remain at 40% on amounts above the exemption. Meanwhile, the annual gift tax exclusion is currently set at $19,000 per recipient and is subject to annual inflation adjustments, as outlined in IRS guidelines.

 

These changes provide high-net-worth individuals and families with a unique opportunity to protect and transfer their wealth, but only if they act promptly. Waiting too long could leave estates vulnerable if future legislation changes the rules again.

What’s Changing in 2026?

• Exemption increase: The federal exemption jumps from $13.99 million (2025) to $15 million (2026), preventing a reversion to the much lower pre-2018 limits.
• Married couples benefit: Couples can now shield up to $30 million from federal estate tax—ideal for multigenerational planning.
• No sunset (yet): Currently, there is no automatic expiration of the new rules; however, Congress can change the laws at any time, making proactive planning critical.

High-net-worth families should also review generation-skipping transfer (GST) tax exposure, which shares the same exemption amount as the estate tax and applies to transfers that skip a generation, such as gifts to grandchildren.

Who Should Take Action?

 

These changes will directly impact families with large estates or long-term gifting plans. For example:

• Estate - A $22 million estate would owe no federal estate tax under the 2026 exemption. Under prior limits, a significant portion would have been taxed at 40%.
• Annual gifting strategy - A couple with five adult children and their spouses could gift $190,000/year tax-free using the $19,000 per-recipient exclusion, though that number could increase with inflation in future years.

However, estates exceeding $15 million for individuals, or $30 million for couples, will still face a 40% estate tax on the excess. Reviewing your estate plan now can help reduce exposure and maximize the available benefits.

California Considerations: Don’t Overlook Proposition 19

 

California does not impose a state-level estate or inheritance tax, but Proposition 19 affects how property is taxed when transferred across generations. Specifically, transferring real estate to children or grandchildren can trigger property tax reassessment at market value, resulting in significantly higher annual tax bills.

 

If your estate includes California real property, align your federal planning with California-specific rules for gifting, titling, and transferring property to avoid unintended tax consequences.

Why You Should Start Planning in Early 2026

 

The start of 2026 is an ideal time to revisit your estate strategy and take advantage of the updated exemption thresholds. Consider the following:

• Review estate documents - Ensure wills, trusts, and power of attorney forms reflect current law and your goals.
• Fund or revisit trusts - Unfunded or outdated trusts may leave key assets unprotected.
• Use strategic tools - Consider irrevocable trusts, intra-family loans, charitable giving, or gifting appreciated assets.
• Leverage the new exemption - The sooner you act, the more flexibility you’ll have if future laws shift again.

Practical Steps to Take Now

• Schedule a legal review, especially if you have a large or complex estate, business interests, or multiple properties.
• Begin making strategic gifts of appreciating assets.
• Confirm that beneficiary designations, deeds, and trust documents are current and aligned.
• Ensure your estate plan supports both liquidity needs and long-term wealth transfer goals.

Work with a Trusted Advisor Early in 2026

 

The 2026 estate tax changes offer a valuable opportunity, but only for those who act early. The new exemption amounts are indexed for inflation, and while favorable today, future laws could change quickly.

 

To make the most of these changes, schedule a review with an experienced estate planning attorney. Longevity Law, led by attorney Michelle Bau, provides tailored, strategic estate planning services backed by over 25 years of legal experience across California, the U.S., and internationally. Michelle works closely with high-net-worth individuals, business owners, and families with cross-border assets.

 

Acting now can maximize your options, reduce long-term tax exposure, and ensure your estate plan is ready to protect your legacy. Feel free to reach out anytime.