Estate Tax Facts
By Neil Rose, CFA
We are living in the most generous estate tax environment in American history.
In 2001, the federal estate tax exemption was $675,000. By 2017, it had grown to $5.49 million. The 2017 Tax Cuts and Jobs Act nearly doubled it to $11.18 million per person. And the One Big Beautiful Bill Act of 2025 (OBBBA), by making those changes permanent and adding further inflation indexing, now lands the exemption at $15,000,000 per person in 2026. That’s $30,000,000 for a married couple.
What the Exemption Actually Means
The federal estate and gift tax exemption is a unified number—it applies to what you give away during life and what you leave at death, combined. Above $15 million per person, assets transferred to heirs are subject to a 40% federal estate tax. The generation-skipping transfer (GST) tax exemption is also set at $15 million. The annual gift exclusion is $19,000 in 2026 ($38,000 if you and your spouse gift together)—this is separate from the estate exemption; you can give the annual gift exclusion every year on a use-it-or-lose it basis without reducing your $15,000,000 estate exemption.
Strategies Worth Understanding
You don’t need to memorize the acronyms, but you should know these estate strategies exist. Your estate planning attorney is your best source to determine if any special trust has merit for you:
SLAT (Spousal Lifetime Access Trust): You make an irrevocable gift to a trust that benefits your spouse. The assets leave your taxable estate—but your spouse retains access.
GRAT (Grantor Retained Annuity Trust): You transfer assets into a trust and receive annuity payments back for a period of years. If those assets grow faster than the IRS’s assumed rate, the excess passes to heirs estate-tax-free.
ILIT (Irrevocable Life Insurance Trust): Life insurance owned inside a trust doesn’t count in your taxable estate.
Dynasty Trusts: Available in certain states, these can hold assets for multiple generations without repeated estate tax exposure at each transfer.
Key Concept: Portability
When a spouse dies, their unused estate tax exemption can be “ported” to the surviving spouse—but only if the estate files a timely federal estate tax return, even if no tax is owed. This is important and surprisingly often missed.
Note that a dozen states levy their own estate tax, and a good number of them have estate exemption amounts lower than the federal $15,000,000 threshold—as low as $1,000,000 per person. States generally don’t allow portability.
The $15 Million Clock: The current exemption is indexed for inflation going forward—that doesn’t mean future legislation can’t reset it. “Permanent” in tax law means “until Congress changes it.” Families with estates above $5-10 million should treat the next few years as a prime window for proactive planning, not a reason to wait.
If the Exemption Is Lowered
If the estate exemption is reduced, there should be time to act and lock in the higher amount before the law changes. Some things to keep in mind should a reduction be in the works:
Book time with your estate planning attorney early; they will become very busy as clients scramble for advice.
It will take time to execute various strategies, especially if wealth is held in the form of a private business or other hard-to-value or illiquid assets. Properly transferring ownership to heirs with appropriate valuation discounts takes time. Don’t wait until the end of the year to start the process.
This material is for informational purposes only and does not constitute tax or legal advice. Please consult your tax professional for guidance specific to your situation.
About the Author
Neil Rose, CFA, is the founder and CEO of Regency Capital Management.
