Beginning January 1st, 2026, the federal estate tax exemption will rise to $15 million per individual and $30 million for couples filing jointly due to the enactment of the “One Big Beautiful Bill Act” under the Trump Administration. This marks a change that individuals should be aware of as the current estate tax exemption is currently $13.99 million per individual and would have reverted back to approximately $7 million per person in 2026 without the bill being passed.
Key Features that Go into Effect January 1st:
- Indexed for Inflation. This means that the estate tax exemption amount will keep pace with inflation.
- No sunset clause. The estate tax exemption is permanent until future legislation changes it.
- 40% tax rate. Estates that exceed the new estate tax exemption figure will be taxed at a rate of 40% on the excess amount.
Advantages for High-Net Worth Individuals:
- Greater flexibility to pass on wealth tax-free
- Enhanced opportunities for strategic estate planning
- Potential to preserve and grow generational wealth
- Reduction in federal estate tax liability.
Additionally, Texas doesn’t have a separate state estate tax or inheritance tax, making it attractive for individuals looking to minimize estate tax exposure.
What Doesn’t Change?
- Portability elections. This has to do with allowing a surviving spouse use a deceased spouse’s unused exemption. Portability remains intact.
- GSTT exemption. The lifetime generation skipping transfer tax exemption (GSTT) continues to be calculated separately and remains applicable for gifts or inheritances to grandchildren, great-grandchildren, or individuals 37 1/2 years younger than the transferor.
- Unified Transfer Tax System. The estate tax, gift tax, and GSTT all remain unified. This means that you can use the new $15M exemption during life or upon death.
- Annual Gift Tax Exclusion. Gifts over the annual gift tax exclusion ($19,000 in 2025) still must be reported to the IRS using a gift tax return (Form 709).
Why You Still Need an Estate Plan?
Despite the increased exemption, estate planning remains essential. High net-worth individuals should not assume they have unlimited time or flexibility. A well-crafted estate plan ensures your wishes are honored, assets are efficiently transferred, and your legacy is preserved. Nielsen Law PLLC provides family-focused estate and business planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information, and to learn about our firm, please contact us. We look forward to working with you.
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