Estate planning is not on the top of the “to-do” list for most people. We are focused on enjoying our daily lives, not on planning for what happens after our passing. However, estate planning can save families significant money as well as stress and frustration. And with an upcoming law change, we will hear much more about estate planning in the coming weeks and months.
Estate taxes, often referred to as the “death tax,” have long been a topic of political debate and financial planning. These taxes apply to the transfer of property after an individual’s death and can affect large estates. In recent years, the federal estate tax exemption has been historically high, but changes are on the horizon. Understanding the current state of the law and upcoming changes in 2026 is crucial for individuals who may be impacted.
As of 2024, the federal estate tax exemption sits at $13.61 million per individual or $27.22 million for married couples. This means estates under this threshold are not subject to federal estate tax. Estates exceeding this amount are taxed at a rate of 40%. The high exemption limit has dramatically reduced the number of estates subject to the tax, allowing many families to transfer wealth across generations without paying estate taxes.
The current estate tax framework was established under the 2017 Tax Cuts and Jobs Act (TCJA), which nearly doubled the exemption from previous levels. This temporary increase has provided significant benefits to high-net-worth individuals, allowing more wealth to be passed on without taxation.
On January 1, 2026, the estate tax exemption is set to revert to pre-2018 levels. The TCJA provisions that increased the exemption amount will expire at the end of 2025 unless Congress takes action to extend or modify the law. Without intervention, the federal estate tax exemption will drop dramatically (expected to be around $7 million in 2026). This reduction will affect far more estates, triggering estate tax liabilities for families who were previously exempt. However, the estate tax rate is expected to remain at 40% for amounts exceeding the exemption.
For those with large estates, proactive estate planning can be crucial before the new law takes effect.
While the current law stipulates that the exemption will be reduced in 2026, there is always the possibility that Congress may act before that date. Given the political nature of tax policy, the estate tax could be revisited in future legislative sessions. A different administration could advocate for either further increases to the exemption or even for stricter limits on exemptions and higher taxes on large estates.
The estate tax landscape is poised for a significant shift in 2026, with the potential to affect many families who previously fell under the exemption. As the exemption amount is set to drop sharply, it is essential for individuals with substantial estates to engage in thoughtful planning before these changes take effect. Consulting with an estate planning professional can ensure that your assets are protected, and your family’s wealth is managed in the most tax-efficient manner possible.
While the political climate surrounding estate taxes remains uncertain, staying informed about changes in the law will be key to preserving your financial legacy.
Wealthspire has deep expertise in estate planning. Our team is well-versed on the current estate tax regulations and can help families navigate the impact that a change in regulations may have on their family’s wealth. Contact us to learn more about the upcoming tax law change and how we can help you.