New Estate Tax Exemptions: What You Need to Know for 2026

As we approach 2026, many people are scratching their heads over what changes to expect in estate tax planning. One major update comes from the recent passage of the One Big Beautiful Bill Act on July 4, 2025. This legislation significantly alters the landscape by increasing the federal estate and gift tax exemptions from $13.99 million to $15 million per individual starting on January 1, 2026. What does this mean for you? Well, it opens up new possibilities for tax-efficient gifting and estate planning strategies.

In practical terms, the new exemptions will continue to increase annually for inflation, making them more advantageous for individuals with substantial estates. However, it’s essential to recognize that while these exemptions are now considered permanent, they could still be modified by future legislation. If your estate exceeds $15 million, or if you’re a married couple with a combined estate over that threshold, it may be time to reassess your planning strategies. Consider whether your existing trusts and gifting strategies are optimized for these new limits.

Another important aspect of the Act is the treatment of the generation skipping transfer (GST) tax exemption, which will also align with the new estate and gift tax exemptions. Although the GST exemption cannot utilize portability elections like the estate tax exemption, it remains crucial for those planning multi-generational wealth transfers. For couples in Vermont, where there’s a separate state estate tax exemption of $5 million, planning remains vital, particularly if your estate exceeds that amount.

It’s not just the tax exemptions that are changing, though. Starting in 2026, charitable deductions for itemizers will only be allowed if they exceed 0.5% of the taxpayer’s adjusted gross income (AGI). This is a significant shift that may prompt individuals to reconsider their timing for charitable contributions. If you’re thinking about making a sizable donation, it might be more beneficial to do so in 2025 rather than waiting until 2026, to maximize your deductions.

Ultimately, these changes underscore the importance of regularly reviewing and updating your estate plan. Whether you’re looking to make major gifts, simplify your trust structure, or adjust your charitable giving strategy, now is the time to consult with a professional. The landscape is shifting, and staying informed means you can better protect your legacy and manage your estate efficiently.

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