New Estate Tax Laws: What to Know Before 2026
Discover essential updates to estate tax laws effective 2026.
Are you ready for the coming changes in estate tax law? If you haven’t been keeping an eye on the evolving landscape of estate planning, now is the time to pay attention. With the One Big Beautiful Bill Act enacted on July 4, 2025, significant adjustments to estate tax exemptions are on the horizon, and they could impact your financial future in ways you might not expect.
Starting January 1, 2026, the federal estate and gift tax exemption will rise from approximately $14 million to $15 million per individual. This increase not only offers a larger cushion for estates but also sets the stage for annual inflation adjustments beginning in 2027. For many families, this means they can engage in strategic gifting without the looming fear of hitting the tax exemption limit. However, if your estate is already exceeding these amounts, careful planning is essential to avoid unnecessary tax burdens.
For couples with estates over $15 million, it’s vital to reassess your current estate plan. You might want to consider adding the increased exemption amounts to existing irrevocable trusts. Conversely, if your estate is below this threshold, especially for married couples, it might be worthwhile to simplify your estate plan into a single trust. Notably, if you reside in Vermont, keep in mind the $5 million estate tax exemption that may necessitate a two-trust structure if your estate exceeds that amount.
Additionally, the generation skipping transfer tax (GST) exemption will now align with the increased estate and gift tax exemptions. While it’s great news that these exemptions are more permanent, remember that they could still change based on future congressional actions. Keeping your estate plan flexible and up-to-date is more important than ever!
Charitable giving also faces new rules. From 2026, itemizers can only deduct charitable contributions that exceed 0.5% of their adjusted gross income. If you’re planning a significant donation, you might want to act before the end of 2025 to maximize your deductions. This change highlights the importance of timing in your charitable contributions and overall tax planning strategy.
In summary, as we approach 2026, be proactive about reviewing your estate plan. Whether it’s considering changes to trusts, reevaluating your gifting strategy, or timing your charitable contributions, staying informed is key to achieving your estate and tax planning goals. If you have questions or feel uncertain about these changes, consulting with a professional can provide clarity and direction tailored to your unique situation.