Estate Tax Exemption 2026: $15M Permanent Guide

What Is the 2026 Federal Estate Tax Exemption?

The 2026 federal estate tax exemption is $15 million per individual and $30 million for married couples who elect portability. The One Big Beautiful Bill Act (Public Law 119-21), signed July 4, 2025, made this level permanent, amended IRC § 2010(c)(3) to eliminate the expiration language, and indexed the exemption for inflation starting in 2027 using 2025 as the base year. The 40% federal rate applies to any amount above the exemption.

Key takeaways

• The $15 million per-person federal exemption is permanent with no expiration date — Congress would need to pass entirely new legislation to reduce it.
• Twelve states plus Washington D.C. still impose their own estate taxes with exemptions as low as $1 million — the OBBBA changed none of them.
• New York's cliff provision is now the only surviving pure cliff in the country — Massachusetts eliminated its cliff in October 2023 through H.4104.
• The GST tax exemption also rose to $15 million but is not portable between spouses — a planning gap that survives even when portability is elected.
• The annual gift tax exclusion is $19,000 per recipient in 2026 ($38,000 for married couples using gift-splitting under IRC § 2513).
• Portability requires a timely Form 706 filing even when no federal estate tax is owed — skip it and forfeit up to $15 million of transferable exemption permanently.
• Gifting highly appreciated assets to beat a sunset that never came may have locked in avoidable capital gains for recipients — the step-up basis trap is now the more common planning error.

The TCJA Sunset That Didn't Happen

The Tax Cuts and Jobs Act of 2017 (Pub. L. No. 115-97) doubled the federal estate and gift tax basic exclusion amount from roughly $5 million to $10 million per person, both indexed for inflation. By 2025, that inflation-adjusted figure reached $13.99 million. Under IRC § 2010(c)(3) as written by the TCJA, the doubling was temporary — the exemption was set to revert to the pre-2018 baseline, inflation-adjusted to roughly $7 million, on January 1, 2026.

The One Big Beautiful Bill Act resolved the uncertainty. It amended IRC § 2010(c)(3) to replace the $5 million baseline with $15 million and removed the expiration language entirely. For decedents dying and gifts made after December 31, 2025, the basic exclusion amount is $15 million — inflation-indexed from 2027 forward, with no sunset. The generation-skipping transfer (GST) tax exemption under IRC § 2631(c) rose to $15 million in parallel.

One practical consequence many articles miss: people who made large lifetime gifts in 2024–2025 specifically to beat the anticipated sunset may now find they have additional unused exemption in 2026. Someone who gifted $13 million in 2025 when the exemption was $13.99 million now has roughly $2 million of fresh exemption in 2026 — worth revisiting with an estate attorney, particularly for GST allocation to dynasty trusts.

The anti-clawback rule — codified in Treasury Regulation § 20.2010-1(c) (Treasury Decision 9884, November 2019) — protects gifts made before any future reduction. Your estate receives credit for the higher exemption that applied when the gift was made, not any lower figure in effect at death. Completed gifts made today under the $15 million exemption lock in that protection permanently, regardless of what a future Congress does.

State Estate Taxes in 2026: Where the Real Traps Are

The OBBBA is a federal law. It did not amend a single state statute. Twelve states and Washington D.C. still impose their own estate taxes, entirely independent of the federal regime. If you live in — or own real property in — any of these jurisdictions, state-level planning is the priority, not federal planning.

State	2026 Exemption	Top Rate	Cliff?	Spousal Portability?
Oregon	$1,000,000	16%	No	No
Rhode Island	~$1,850,000	16%	No	No
Massachusetts	$2,000,000	16%	No (reformed Oct 2023)	No
Washington	$3,076,000 (Jan–Jun) / $3,000,000 (Jul+)†	20%†	No	No
Minnesota	$3,000,000	16%	No	No
Illinois	$4,000,000	16%	No	No
Maryland	$5,000,000	16%	No	Yes
Vermont	$5,000,000	16%	No	No
Hawaii	$5,490,000	20%	No	No
Maine	$7,000,000	12%	No	No
New York	$7,350,000	16%	Yes — only pure cliff remaining	No
Connecticut	$15,000,000	12%	No	No
Washington D.C.	~$4,900,000	16%	No	No

†Washington's top rate dropped from 35% to 20% effective July 1, 2026 under Engrossed Senate Bill 6347, signed by Governor Ferguson on March 24, 2026. The exemption reset to $3,000,000 for deaths on or after July 1 and is not set to increase going forward due to an expired CPI reference in the statute. See Washington estate tax law changes 2026 for the full rate tables.

Five states — Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania — impose an inheritance tax on beneficiaries rather than on the estate itself. Maryland is the only state with both an estate tax and an inheritance tax. Iowa fully repealed its inheritance tax for deaths on or after January 1, 2025. Inheritance tax rates depend on the heir's relationship to the deceased: spouses and direct descendants often pay nothing or a reduced rate, while distant relatives and non-relatives can face rates of 10–18%.

Florida, Texas, California, Georgia, and North Carolina have no estate or inheritance tax. Federal planning is the only death-tax layer for those residents — and the $15 million federal exemption covers the vast majority of estates in those states.

New York's Three Tax Traps in One State

New York is the only remaining state with a pure cliff provision. Most coverage stops there. Two other New York-specific rules compound the problem and receive far less attention.

Trap 1: The cliff. Under N.Y. Tax Law § 952, once a taxable estate exceeds 105% of the basic exclusion amount — at $7,717,500 in 2026 — the entire exemption is eliminated and the tax applies to the full estate from dollar one.

Here is what that looks like in 2026 dollars, confirmed against current New York estate tax practitioners:

• Estate A — $7,300,000. Below the $7,350,000 exemption. New York estate tax owed: $0.
• Estate B — $7,400,000. Just $50,000 over the exemption, inside the cliff zone. New York estate tax owed: approximately $136,000. Effective tax rate on that $50,000 excess: over 250%. Estate B's heirs receive less net value than Estate A's heirs, despite Estate B being nominally worth more.
• Estate C — $7,500,000. $150,000 over the exemption, still inside the cliff zone. New York estate tax owed: approximately $386,000 — an effective marginal rate of approximately 257% on the $150,000 excess, per NYSSCPA analysis.
• Estate D — $7,800,000. Past the 105% cliff. No exemption applies at all. New York estate tax owed: approximately $746,000, computed on the full $7.8 million from dollar one.

Three planning tools address the cliff. First, lifetime gifting: New York has no state gift tax, so assets gifted during life reduce the taxable estate without consuming any state exemption at death. Second, disclaimer and bypass trust planning: a surviving spouse can disclaim part of an inherited estate, routing assets into a credit shelter trust excluded from the survivor's taxable estate. Third, the "Santa Clause" charitable provision: a formula bequest directing to charity the amount above the exemption — but only when the charitable deduction saves more than it costs — can reduce the estate to just below the cliff. The Santa Clause breakeven for 2026 is approximately $8,140,000; above that level, the math no longer favors the charitable redirect.

Trap 2: No portability. Unlike the federal system, New York does not allow a surviving spouse to inherit the deceased spouse's unused state exemption. A New York couple with a combined $14 million estate and no bypass trust planning can owe New York estate tax at the surviving spouse's death even when they owe zero federal tax — because New York's $7.35 million exemption is use-it-or-lose-it at each spouse's death.

Trap 3: The three-year gift clawback. Under N.Y. Tax Law § 954, any taxable gift made within three years of a New York resident's death is clawed back into the decedent's estate for state estate tax purposes. New York has no state gift tax, so lifetime gifts are a primary planning tool — but gifts made in April 2024 by someone who dies in February 2026 are pulled back in. Gifts made more than three years before death are permanently outside the estate. This means New York residents need to begin gifting well in advance.

Illinois residents near the $4 million exemption face no cliff but do face a meaningful state gap: a $6 million Illinois estate pays no federal estate tax but owes Illinois estate tax on $2 million at rates up to 16%.

Massachusetts After the 2023 Reform: No Cliff, But Still a Planning Problem

Most estate-planning articles published before 2024 describe Massachusetts as having a cliff identical to New York's. That is no longer accurate.

Massachusetts eliminated its cliff through H.4104, enacted October 4, 2023. The law raised the exemption from $1 million to $2 million and added a $99,600 credit equal to the tax on the first $2 million of estate value. Only the amount above $2 million is now effectively taxed — a small, proportional bill rather than an all-or-nothing penalty.

What Massachusetts still has, and what remains a serious planning issue:

• No portability between spouses. A married couple with $4 million in combined assets whose plan doesn't include a credit shelter trust loses one spouse's $2 million exemption at the first death. That omission can cost the family approximately $99,600 to $320,000 in avoidable Massachusetts estate tax at the surviving spouse's death.
• No inflation indexing. The $2 million threshold under M.G.L. ch. 65C has no adjustment mechanism. As home values, retirement accounts, and investment portfolios grow, more Massachusetts families will cross the threshold each year without any corresponding increase in the exemption.
• No state gift tax and no gift lookback. Unlike New York, Massachusetts does not claw back pre-death gifts. Lifetime gifting permanently removes assets from the Massachusetts taxable estate, making systematic annual gifting one of the most powerful planning tools available to Massachusetts residents.

A worked example: a Massachusetts couple owns an $850,000 home, $1.1 million in retirement accounts, and $250,000 in a brokerage account. Combined estate: $2.2 million. With no trust planning, the survivor's taxable estate at $2.2 million owes approximately $57,000 in Massachusetts estate tax. A properly funded credit shelter trust at the first death reduces the survivor's taxable estate to $2 million or below — Massachusetts estate tax owed: $0.

The Portability Trap: One Missing Form Can Cost $1.2 Million

Here is a worked example that illustrates exactly how the portability trap operates — and how a single Form 706 prevents it.

The scenario. Maria and Tom are married. Tom dies in 2026 with $7 million of assets in his name. He leaves everything to Maria, who receives the assets tax-free under the unlimited marital deduction. Maria's own assets are $11 million. Tom's executor sees a $7 million estate well below the $15 million federal exemption and concludes there is nothing to file.

Without portability. Tom's $15 million exemption is wasted. When Maria later dies with roughly $18 million ($11 million of her own plus the $7 million inherited from Tom), her individual $15 million exemption shelters $15 million. The remaining $3 million is subject to a 40% federal estate tax — a $1.2 million bill that was entirely preventable.

With portability. Tom's executor files Form 706 within nine months of Tom's death and elects portability under IRC § 2010(c)(5)(A). Because Tom's taxable estate is effectively zero after the marital deduction, his entire $15 million DSUE transfers to Maria. When Maria later dies with $18 million, her combined exemption is $30 million — more than enough to shelter her entire estate with zero federal estate tax owed.

The only difference is one Form 706.

The Rev. Proc. 2022-32 safety net. If the executor misses the nine-month deadline, Revenue Procedure 2022-32 (effective July 8, 2022, superseding Rev. Proc. 2017-34) provides a streamlined late-election path: qualifying estates can file Form 706 up to five years after the decedent's date of death without a private letter ruling, by noting "FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A)" at the top of the return. This is a fallback, not a plan. There is no user fee under the simplified procedure, but the return must be complete and properly prepared per Treas. Reg. § 20.2010-2(a)(7). After five years, relief requires an expensive private letter ruling under Treas. Reg. § 301.9100-3 and is uncertain.

Portability does not extend to the GST exemption. The generation-skipping transfer tax exemption under IRC § 2631(c) also rises to $15 million per person in 2026, but the GST exemption is not portable between spouses. If Tom dies without allocating his GST exemption to a dynasty trust or other GST-exempt structure, that exemption is permanently lost. A surviving spouse cannot inherit unused GST exemption through any election or filing. Married couples who have — or expect to have — grandchildren as beneficiaries need proactive GST allocation, not just portability planning.

The Step-Up Trap: When "Use It or Lose It" Gifts Backfire

This is the planning mistake competitors aren't writing about yet — and it affects families who acted on the pre-OBBBA advice.

Under IRC § 1015, assets gifted during life carry over the donor's original cost basis to the recipient. Under IRC § 1014, assets inherited at death receive a stepped-up basis equal to fair market value on the date of death, permanently erasing pre-death appreciation. These two rules interact directly with the OBBBA's $15 million exemption in a way that catches many families off guard.

The worked example. In 2024, David gifts $2 million of stock he purchased decades ago for $200,000 to his daughter Emma, intending to beat the anticipated TCJA sunset. The gift carries over David's $200,000 basis. Emma's embedded gain is $1.8 million. When Emma eventually sells, she owes capital gains tax on the full $1.8 million. At long-term capital gains rates (20% federal rate plus 3.8% net investment income tax = 23.8% for high earners), that is approximately $428,400 in capital gains taxes that Emma will pay over time.

Had David kept the stock until death, Emma would have inherited it with a stepped-up basis equal to its fair market value at David's death under IRC § 1014. If the stock was worth $2 million or more at that time, Emma's capital gains tax on the original $1.8 million of appreciation: $0. And because David's estate is well below $15 million, his estate tax cost from holding the stock: also $0.

The net result: the "use it or lose it" gift cost approximately $428,400 in avoidable capital gains that holding until death would have eliminated entirely.

When gifting still makes sense despite the basis cost:

• The recipient is in the 0% long-term capital gains bracket (taxable income under roughly $47,025 single / $94,050 married in 2026) and will sell immediately.
• The estate is projected to grow above $15 million, making estate tax exposure on future appreciation more costly than the basis carryover.
• The gift involves depreciable real estate where accelerated depreciation has already been taken — different trade-off analysis applies.
• The goal is to remove future appreciation from the estate, not current value.

The IRC § 1014(e) one-year trap. If a donor gives an appreciated asset to a dying family member within one year of that person's death, and the asset passes back to the original donor (or the donor's spouse) through the decedent's estate, IRC § 1014(e) blocks the step-up entirely. The donor receives the asset back at the pre-gift carryover basis. This "deathbed gift" strategy has been litigated and does not work when the asset returns to its original owner.

Anyone who made large gifts of appreciated stock, real estate, or business interests in 2024–2025 primarily to beat the TCJA sunset should confirm with an estate attorney whether those assets would have been better held until death given the permanent $15 million exemption. For business owners specifically, the basis and valuation discount considerations interact in additional ways worth reviewing.

Does Your Estate Need Attention? A Decision Table

Your situation	Federal exposure?	State exposure?	Top priority
Single, estate < $2M, no estate-tax state (FL, TX, NC, GA)	No	No	Draft a will; name beneficiaries; healthcare directive
Single, $2M–$15M, no estate-tax state	No	No	Probate avoidance (living trust); step-up basis planning; beneficiary review
Single, $1M–$2M, Oregon or Rhode Island	No	Yes	State-level trust; lifetime gifting; consult estate attorney
Married, combined $4M–$15M, Massachusetts	No	Yes (no portability)	Credit shelter trust; lifetime gifting; no-cliff confirmed
Married, combined $7M–$15M, New York	No	Yes (cliff + clawback)	Bypass trust; begin gifting now (3-year rule); Santa Clause provision
Any estate near NY cliff ($7.35M–$8.14M)	No	Yes (severe cliff)	Formula clauses; disclaimer planning; lifetime gifts started 3+ years before death
Married, any size estate, with grandchildren as beneficiaries	Possible	Varies	GST exemption allocation at first death; dynasty trust
Married, combined > $30M	Yes	Likely	SLAT, IDGT, dynasty trust, charitable strategies
Held appreciated assets; gifted to beat sunset	No federal tax — but capital gains exposure	Varies	Review basis carryover vs. step-up trade-off; hold remaining assets until death

What to Do With Your Estate Plan Now

1. Check whether your state has an estate tax. If you live in — or own real property in — any of the 13 jurisdictions in the table above, run a state-level exposure analysis first. Oregon residents need this the moment their estate clears $1 million.

2. Review formula clauses in any existing trust. A bypass trust or testamentary trust that funds "up to the applicable exclusion amount" now references $15 million, not $7 million. Confirm the result still matches your intent. Some families funded large SLATs or GRATs in 2024–2025 to beat the anticipated sunset — the gifts are irrevocable, but the surrounding estate plan should be reviewed.

3. Audit the basis of any "sunset gifts." If you made large gifts of appreciated assets in 2024 or 2025 specifically to use the higher TCJA exemption before it expired, identify the cost basis that was transferred. Quantify the capital gains exposure now held by the recipients. Discuss with a tax advisor whether the remaining portfolio should be restructured to prioritize holding appreciated assets until death. For digital assets and cryptocurrency, the basis tracking requirement is particularly important.

4. Instruct your executor explicitly on Form 706. If you are married, add a specific provision to your will directing your executor to file Form 706 and elect portability after your death, even when your estate owes no federal estate tax. Do not leave this to a conclusion the executor will draw independently — the cost of getting it wrong is too high, and Rev. Proc. 2022-32's five-year window does not make the nine-month standard deadline optional.

5. Address the GST gap if you have grandchildren. If multigenerational transfers are part of your plan, confirm that your GST exemption is allocated — either through lifetime gifts to a dynasty trust or through a testamentary GST allocation at death. This does not happen automatically and does not transfer via portability.

6. Update beneficiary designations. Retirement accounts, life insurance, and payable-on-death accounts pass entirely outside your will. They go to whoever is named on the account form. Outdated designations are the most common and most avoidable estate planning error. For a picture of what happens when none of this is in place, see what happens if you die without a will.

7. Decide between a will and a living trust. A living trust avoids probate, keeps your estate private, and lets a successor trustee act without court involvement if you become incapacitated. A will is simpler and less expensive to create but goes through probate. Our will vs. living trust guide walks through when each approach makes sense for different family situations.

8. Confirm your documents are correctly executed. A will that does not meet your state's witness and notarization requirements is invalid regardless of its contents. You can create your will online through Pactlio's guided plain-English interview — the process generates state-specific execution instructions (witness counts, self-proving affidavit availability, notarization requirements) alongside the draft document, ready for attorney review. For a state-by-state look at what makes an online will legally valid, see is an online will legal.

9. Note the non-citizen spouse rule. Gifts to a spouse who is not a U.S. citizen are capped at $194,000 per year under IRC § 2523(i)(2) for 2026, not the unlimited marital deduction that applies between citizen spouses. The unlimited marital deduction also does not apply at death for non-citizen spouses by default — qualified domestic trust (QDOT) planning is required.

Common Mistakes to Avoid

• Assuming "no federal tax" means "no planning needed." State estate taxes catch families at $1 million, probate costs hit almost everyone, and beneficiary designations age out regardless of tax law.
• Skipping Form 706 because no federal estate tax is owed. The portability election is not automatic. No filing means no DSUE — permanently — and forfeiture of up to $15 million in transferable exemption.
• Gifting highly appreciated assets that would be better held until death. Under IRC § 1015, gifts carry over the donor's basis. Under IRC § 1014, inherited assets get a step-up. With the $15 million exemption in place, most families lose more to capital gains taxes on gifted assets than they would have lost to any estate tax.
• Conflating the New York and Massachusetts cliffs. Massachusetts eliminated its cliff through H.4104 in October 2023. New York's cliff under N.Y. Tax Law § 952 is the only surviving pure cliff — and the three-year gift clawback under § 954 makes it harder to escape than most articles explain.
• Forgetting that the GST exemption is not portable. Electing portability preserves the estate tax DSUE. It does nothing for the deceased spouse's GST exemption. Treat them as two separate planning items.
• Using old bypass-trust formulas without review. A formula clause calibrated at $7 million can now deposit $15 million into a bypass trust and freeze the surviving spouse out of assets they expected full access to.
• Treating "permanent" as absolute. "Permanent" in U.S. tax law means "until Congress changes it." Hedging through completed lifetime gifts of depreciating or income-producing assets (rather than appreciated ones) costs nothing if the exemption stays high and saves significantly if it falls.
• Ignoring state inheritance taxes. Five states tax the recipient, not the estate. Who you leave assets to — not just how much — determines the bill in Kentucky, Nebraska, New Jersey, Maryland, and Pennsylvania.

Sources

• One Big Beautiful Bill Act, Public Law 119-21 (enacted July 4, 2025): https://www.congress.gov/bill/119th-congress/house-bill/1/text
• IRS: What's New — Estate and Gift Tax (confirming $15M basic exclusion for 2026): https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax
• IRS: Instructions for Form 706 (09/2025 revision, including Rev. Proc. 2022-32 late portability guidance): https://www.irs.gov/instructions/i706
• Revenue Procedure 2022-32 (late portability election, up to 5 years): https://www.irs.gov/pub/irs-drop/rp-22-32.pdf
• IRS Rev. Proc. 2025-32 § 4.42 (annual gift exclusion $19,000 for 2026): https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
• Treasury Decision 9884 / Treas. Reg. § 20.2010-1(c) (Anti-Clawback Final Regulations, November 2019): https://www.federalregister.gov/documents/2019/11/26/2019-25434/regulations-reducing-exclusion-amount
• Internal Revenue Code § 2010 (Unified Credit Against Estate Tax): https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section2010&num=0&edition=prelim
• Internal Revenue Code § 2631(c) (GST exemption, non-portability): https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section2631&num=0&edition=prelim
• Internal Revenue Code § 1014 (Stepped-Up Basis at Death): https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section1014&num=0&edition=prelim
• Internal Revenue Code § 1015 (Carryover Basis for Gifts): https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section1015&num=0&edition=prelim
• N.Y. Tax Law § 952 (cliff provision, 105% threshold): https://www.nysenate.gov/legislation/laws/TAX/952
• N.Y. Tax Law § 954 (three-year gift clawback): https://www.nysenate.gov/legislation/laws/TAX/954
• New York State Department of Taxation and Finance — Estate Tax ($7,350,000 BEA for 2026): https://www.tax.ny.gov/pit/estate/etidx.htm
• NYSSCPA — Navigating the 2026 New York State Estate Tax (cliff calculation examples): https://nysscpa.org/news/1050419-navigating-the-2026-new-york-state-estate-tax-planning-with-and-for-the-new-york-and-federal-estate-tax-exemptions-the-new-york-cliff-tax-and-other-estate-planning-strategies-2026-04-01
• Twomey Latham — Avoiding the Cliff: Understanding New York's Estate Tax (dollar examples): https://www.suffolklaw.com/avoiding-the-cliff-understanding-new-yorks-estate-tax/
• Central New York Community Foundation — NY Estate Tax Cliff & The Santa Clause (breakeven math ~$8,140,000): https://cnycf.org/new-york-state-estate-tax-cliff-the-santa-clause/
• Massachusetts H.4104 (October 2023) — eliminating cliff, raising exemption to $2M, adding $99,600 credit: https://malegislature.gov/Bills/193/H4104
• Massachusetts General Laws Chapter 65C (estate tax statute): https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter65C
• Washington Engrossed Senate Bill 6347 (signed March 24, 2026 — rates rollback to 20%, exemption reset to $3M from July 1, 2026): https://app.leg.wa.gov/billsummary?BillNumber=6347&Year=2026
• Washington Department of Revenue — Estate Tax (confirming $3,000,000 exemption from July 1, 2026): https://dor.wa.gov/taxes-rates/other-taxes/estate-tax
• Pierce Atwood: The One Big Beautiful Bill Act and Estate Planning: https://www.pierceatwood.com/alerts/one-big-beautiful-bill-act-and-estate-planning-what-you-need-know
• Nelson Mullins: 2026 Estate and Gift Tax Update: https://www.nelsonmullins.com/insights/blogs/tax-reports/all/2026-estate-and-gift-tax-update
• Morgan Lewis: IRS Announces Increased Gift and Estate Tax Exemption Amounts for 2026: https://www.morganlewis.com/pubs/2025/10/irs-announces-increased-gift-and-estate-tax-exemption-amounts-for-2026

This article is general information, not legal advice. Laws vary by jurisdiction. Pactlio generates professional drafts for review — have a licensed attorney review anything important.