Estate tax changes for 2026 and beyond

The recently passed One Big Beautiful Bill Act (OBBBA) brought about some estate tax changes, and its effects will be felt for years to come by families with significant assets.

Even if your estate isn't among the largest, gift and estate tax rules can influence how you pass wealth to the next generation. Let's review what's changing and what it may mean for you.

The OBBBA brought clarity to an area of tax law that had been uncertain for wealthy families. Under the 2017 Tax Cuts and Jobs Act (TCJA), the current federal lifetime estate tax exemption was scheduled to be cut roughly in half at the end of 2025. If allowed to expire, the lifetime exemption amount would drop to pre-2018 levels of $5 million per individual and $10 million for married couples, adjusted for inflation.

That looming TCJA sunset provision had many high-net-worth individuals feeling pressure to transfer wealth quickly or risk losing a valuable opportunity.

The OBBBA permanently increased the lifetime exemption amount. In practical terms, this eases the "use it or lose it" dilemma. Families no longer face a hard deadline that might make them feel forced to rush decisions about gifting large portions of their wealth before the law changes. Instead, they have time and breathing room to align estate and gift tax strategies with their long-term goals and values.

While this shift removes immediate urgency, it doesn't make estate planning any less important. Exemptions and tax laws still can change in the future, and state-level taxes may apply regardless of federal thresholds. Thoughtful, proactive planning remains essential to protect your legacy.

For 2025, the federal estate tax exemption is $13.99 million per individual ($27.98 million for a married couple). In addition, the annual gift tax exclusion allows you to give up to $19,000 per recipient without filing a gift tax return (Form 709).

Beginning January 1, 2026, the OBBBA raises the lifetime exemption to $15 million per individual ($30 million for married couples), with annual inflation adjustments thereafter to ensure they rise gradually with the cost of living.

The IRS has officially announced the gift tax exemption amount for 2026, the first $19,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts.

If you give more than the annual exclusion amount to any one person, you must report the gift on a gift tax return, and the excess counts against your lifetime exemption. While you won't owe gift tax immediately, the amount reduces the portion of your estate that can pass tax-free at death. This makes tracking your gifts and coordinating them with your overall estate plan an essential part of long-term planning.

The OBBBA only affects federal estate tax rules—state-level estate or inheritance taxes still apply based on local laws. Each state has its own set of rules, so it's a good idea to work with professionals who are familiar with local laws.

With permanently higher federal estate tax exemptions under the OBBBA, 2026 is the ideal time to review and update your estate plan for tax efficiency. Even if you've already made gifts to take advantage of the old deadline, the OBBBA creates new opportunities to refine your strategy.

One way to reduce the size of your taxable estate is by making annual gifts. The annual gift tax exclusion allows you to transfer wealth each year without reducing your lifetime exemption. Over time, steady gifting lowers your taxable estate while providing meaningful support to children, grandchildren or other beneficiaries.

The new law also means that if you previously exhausted your exemption under the old rules, you'll soon be able to make additional tax-free transfers once the higher threshold takes effect. This provides more flexibility for families with substantial estates.

Beyond gifting, there are other planning techniques to consider, such as:

• Irrevocable trusts. Irrevocable trusts allow you to move assets out of your estate, provide ongoing income, and shield wealth from estate taxes. Here are a couple of options to consider:

  • A spousal lifetime access trust (SLAT) allows spouses to transfer property to a trust for the benefit of the other spouse. Spouses can gift cash, life insurance, marketable securities, real estate and other assets to the SLAT. The beneficiary spouse can request distributions of income or principal during their lifetime. When the SLAT terminates upon the death of the beneficiary spouse, the remaining trust assets pass to the remainder beneficiaries named in the trust document.
  • A grantor retained annuity trust (GRAT) allows individuals to essentially freeze a portion of their estate's value today while shifting the appreciation of those assets to beneficiaries free of estate and gift taxes. The grantor transfers assets into the trust. The GRAT returns the initial transfer, plus some interest, to the grantor over the term of the trust. At the end of the GRAT term, any assets remaining in the trust pass to heirs free of gift and estate taxes.
• Portability. The law continues to allow a surviving spouse to use any unused portion of their deceased spouse's exemption.

Combining estate planning strategies with higher exemption amounts can help you minimize your estate tax exposure and protect your legacy.

Estate tax laws can and do change, but your goals to provide for loved ones and preserve your values remain constant. The OBBBA brings clarity, and the decisions you make now can have lasting consequences for your family. Before making big changes, it's a good idea to consult with an estate planning attorney to ensure your plan aligns with the current law.

Partnering with a Thrivent financial advisor also can help you navigate the new rules and integrate tax strategies with your broader financial goals.