Families with estates above roughly $13 million no longer face a looming deadline that threatened to cut their federal tax shelter in half. Public Law 119-21, signed on July 4, 2025, permanently raised the basic exclusion amount under the federal estate and gift tax to $15,000,000 per person for 2026 and indexed it to inflation going forward. The change replaces the prior $5,000,000 statutory figure in the Internal Revenue Code and applies to estates of decedents dying and gifts made after December 31, 2025.
Why a permanent $15 million exemption changes estate planning now
Before this law, the higher exemption created by the 2017 tax overhaul was set to expire at the end of 2025, which would have dropped the per-person shelter back toward roughly half its current level. That sunset created years of uncertainty for executors, trustees, and wealthy families trying to decide whether to use the full exclusion immediately or wait. Congress ended that guessing game: the accompanying House report describes the provision as an “Extension and Permanent Enhancement” of the estate and gift tax exemption, locking in the $15,000,000 floor with annual inflation adjustments.
The permanence shifts the calculus for high-net-worth planning. With no expiration date on the horizon, advisors can structure long-term transfers, such as grantor-retained annuity trusts and spousal lifetime access trusts, without the risk that the exemption will shrink mid-strategy. Couples can now shelter up to $30,000,000 combined before any federal estate tax applies. That stability encourages front-loading gifts to use the current exclusion amount before inflation adjustments push the threshold higher in future years, effectively letting donors transfer appreciating assets while the exemption is at its statutory starting point.
At the same time, the larger exclusion may change how families think about liquidity and asset mix. With fewer estates expected to owe federal tax, some clients may feel less pressure to maintain large life insurance policies or sell illiquid assets to cover a projected bill. Others may use the expanded room to shift more closely held business interests, family limited partnership units, or concentrated stock positions into trusts designed to centralize control while moving future appreciation out of the taxable estate.
Statutory text and IRS guidance confirm the $15 million threshold
The statutory change is already reflected in federal law. The preliminary version of 26 U.S.C. § 2010 shows that Public Law 119-21 substituted “$15,000,000” for “$5,000,000” in the basic exclusion amount, with an applicability note confirming the amendments cover estates of decedents dying and gifts made after December 31, 2025. The provision continues to rely on the same inflation-adjustment mechanism that previously applied to the lower statutory amount, so the $15,000,000 figure is a baseline rather than a cap.
The IRS has updated its own materials accordingly. In its online guidance, the agency explains that the law amends Section 2010(c)(3) to set the basic exclusion amount at $15,000,000 for calendar year 2026 and indicates that future years will reflect inflation indexing. The estate-tax filing threshold table for Form 706 now lists 2026 at that figure, meaning executors will use $15,000,000 as the cutoff for determining whether a federal estate tax return must be filed, even if no tax is ultimately due. For lifetime transfers, the same exclusion amount applies in calculating whether cumulative taxable gifts trigger gift tax or merely reduce the remaining unified credit.
Nonpartisan analysts have also detailed the change. A recent briefing from the Congressional Research Service outlines how the new law replaces the scheduled “sunset” of the higher exemption with a permanent statutory floor, noting that this significantly reduces the number of estates projected to owe federal tax after 2025. The analysis emphasizes that, although the exemption is now permanent, Congress retains the authority to revisit the threshold in future legislation, so planning should continue to allow for potential policy shifts over longer horizons.
Practical steps for families and advisors
For families whose net worth is close to, or above, the new threshold, the immediate task is to update projections. Balance sheets and prior estate plans built around a post-2025 drop in the exemption may now be overly conservative. Advisors should revisit whether existing trusts, buy-sell agreements, and charitable bequests still match the client’s goals in a world where federal estate tax is less likely to be the binding constraint.
The larger exclusion does not eliminate the need for planning. State-level estate or inheritance taxes, which often have far lower thresholds, can still drive significant liabilities. So can income tax considerations, including basis step-up at death and the interaction between lifetime gifts and capital-gains exposure for heirs. In some cases, it may be more efficient to hold appreciated assets until death to secure a basis adjustment, even if there is unused federal exclusion room.
Finally, the permanence of the $15,000,000 baseline gives younger wealthy families more time to implement gradual strategies. Annual exclusion gifts, intrafamily loans, and periodic transfers to trusts can now be paced over decades rather than rushed into a short pre-sunset window. That flexibility may reduce the risk of overcommitting assets too early while still taking full advantage of the expanded federal shelter.
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