Starting in 2026, an individual can pass up to $15 million to heirs before the federal estate tax applies, the result of a new law that reset one of the most consequential numbers in estate planning. For a married couple, that shelters up to $30 million. The figure matters because it draws the line between the tiny fraction of estates that owe federal estate tax and the overwhelming majority that owe nothing, and the new law both raised the line and, for the first time in years, removed the scheduled cliff that had been hanging over it.
How the $15 million exemption works in 2026
The federal estate tax applies only to the value of an estate above the exemption, formally called the basic exclusion amount. The IRS confirmed that estates of people who die in 2026 have a basic exclusion amount of $15,000,000, up from $13,990,000 for those who died in 2025. Everything below that threshold passes to heirs free of federal estate tax; only the amount above it is potentially taxable, and the top federal estate tax rate remains 40%.
The practical effect for most families is straightforward: they will never encounter the federal estate tax at all. A retiree whose home, savings, and retirement accounts add up to $2 million or $3 million sits far below the threshold, and no federal estate tax return is owed on that basis. The tax is a concern for a narrow slice of high-net-worth estates, which is why the size of the exemption, not the 40% rate, is the number that determines who is affected.
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Why the new law changed the planning picture
The $15 million figure came from the tax law signed in 2025, which reset the exemption and, according to a Morgan Lewis analysis, made it permanent while keeping it indexed to inflation each year going forward. That permanence is the real shift. Under the prior rules, the higher exemption was scheduled to expire and drop by roughly half after 2025, which had pushed many families to rush lifetime gifts before the window closed.
Removing that scheduled cliff changes the calculus. Families who had felt pressure to give away large sums quickly to lock in the higher exemption no longer face a countdown, and the annual inflation indexing means the threshold will keep drifting upward rather than snapping back down. For estates well under $15 million, which is nearly all of them, the change simply confirms that federal estate tax is not part of the plan. For estates near or above the line, it converts a deadline-driven scramble into a longer-term decision.
The exemption is also unified with the federal gift tax, so the same lifetime amount covers both large gifts made during life and transfers at death. A person who gives away part of the exemption during their lifetime reduces what remains available at death by that amount. Keeping track of lifetime taxable gifts therefore matters for anyone whose wealth approaches the threshold, because those gifts draw down the same $15 million pool.
Two mechanisms sit alongside the headline exemption and do most of the everyday work. The annual gift tax exclusion, which the IRS left at $19,000 per recipient for 2026, lets a person give that much to each recipient without touching the lifetime amount or filing a gift tax return, so a couple can move $38,000 per recipient every year entirely outside the $15 million pool. Portability handles the couple’s math at death: a surviving spouse can claim a deceased spouse’s unused exclusion by filing a federal estate tax return, which is how two spouses combine their exemptions to shelter up to $30 million rather than forfeiting the first spouse’s share. The separate generation-skipping transfer tax exemption was reset to the same $15 million, aligning gifts that skip to grandchildren with the main figure.
What older families should watch beyond the federal number
A high federal exemption does not mean estate taxes have disappeared everywhere. Several states levy their own estate or inheritance taxes with exemption thresholds far lower than the federal $15 million, sometimes in the range of $1 million to $2 million or with no exemption at all for certain heirs. A family that owes nothing to the federal government can still owe a meaningful amount to a state, so the federal figure is only part of the picture for residents of those states.
There is also a separate benefit that survives independent of the estate tax: the step-up in basis. When assets pass at death, their cost basis generally resets to the value on the date of death, which can wipe out capital gains that built up over decades. For a family whose estate is well below the exemption, that basis step-up is often the more valuable feature of the current rules, because it can save heirs real money in income tax when they later sell inherited property or investments.
The headline number is large enough that most families can set aside federal estate tax as a concern and focus on the mechanics that actually touch them: state-level taxes, the basis step-up, and keeping beneficiary designations and titling current so assets pass the way they intend. The 2026 exemption settles the federal question for nearly everyone, but the parts of an estate plan that determine what heirs actually keep sit mostly outside that single figure.
This article was produced with AI assistance and reviewed against primary sources by The Money Overview editorial team.
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