Federal Estate Tax Exemption 2026 and Who Needs to Plan

Every year, clients ask whether they should worry about the estate tax. For most, the answer is no, but the reason has changed. A scheduled cut at the end of 2025 sent many families scrambling to use their exemption before it shrank. That cut did not happen. The federal estate tax exemption for 2026 is $15 million per person, and the law that set it removed the automatic sunset.

That does not mean the tax is gone. A 40 percent rate still applies to assets above the exemption, and the definition of what counts is broader than most people assume. A surgeon couple in their 50s with two large retirement accounts, a paid-off home in Buckhead, a practice interest, and $4 million of term life insurance can approach $30 million by the time the second spouse dies, especially with twenty more years of compounding.

This article explains how the exemption works, what is included in a taxable estate, how portability protects married couples, and who should actually take action. It is educational, not tax or legal advice. Attend does not draft estate documents or prepare tax returns; we run the projections and coordinate with your outside attorney and CPA.

How the Federal Estate Tax Exemption Works in 2026

The federal estate tax is a tax on the transfer of wealth at death. The estate tax exemption, formally the basic exclusion amount, is the value each person can transfer free of the tax. The One Big Beautiful Bill Act, signed in July 2025, set it at $15 million per person beginning in 2026, indexed for inflation after that, and eliminated the sunset that would have cut it roughly in half. The IRS publishes the current figure in its estate and gift tax guidance.

The exemption is unified with the gift tax. Every taxable gift you make during life, meaning gifts above the annual exclusion to any one person, reduces the exemption available at death. Gifts within the annual exclusion, which is $19,000 per recipient for 2026, do not count against it. The generation-skipping transfer tax has its own exemption of the same amount, applied to transfers that skip a generation.

Above the exemption, the tax rate is a flat 40 percent. A single person's $17 million estate would owe roughly $800,000 on the $2 million excess. Transfers to a US-citizen spouse and to qualifying charities are fully deductible, which is why married couples rarely pay tax at the first death.

What Counts in Your Taxable Estate

The gross estate is much larger than the probate estate. It includes everything you own or control at death, whether it passes by will, trust, or beneficiary designation:

• Real estate, including your primary home and any vacation property, at fair market value.
• Retirement accounts at full value, with no reduction for the income tax the beneficiary will owe.
• Life insurance you own on your own life, at the full death benefit, not the cash value.
• Taxable brokerage accounts, bank accounts, and cash.
• Business interests, including a medical practice or LLC units, at appraised value.
• Assets in a revocable trust, jointly owned property (at least half), and certain gifts made within three years of death.

The life insurance trap

A physician with $3 million in retirement accounts, a $1.5 million home, $2 million in brokerage assets, and a $5 million term policy has an $11.5 million gross estate today. Add growth and a spouse with a similar profile, and a couple can exceed $30 million by their late 70s. Life insurance is often the largest item and the easiest to remove through an irrevocable life insurance trust if the numbers justify it.

Deductions that reduce the taxable estate

From the gross estate, the executor subtracts debts, funeral and administration expenses, bequests to a surviving spouse, and bequests to charity. The unlimited marital deduction means a married person can leave everything to a spouse with no tax at the first death. The tax is deferred until the survivor dies, which is why portability matters so much.

Portability and the Form 706 Election

Before 2011, married couples needed complex trust planning to avoid wasting the first spouse's exemption. Now the deceased spouse's unused exclusion amount, the DSUE, transfers to the survivor through a portability election. If the first spouse dies having used none of a $15 million exemption, the survivor can have $30 million available.

The catch is procedural. Portability is elected only by filing a federal estate tax return, Form 706, for the deceased spouse, even if no tax is due and the estate is far below the filing threshold. The return is due nine months after death, with a six-month extension available. The IRS also allows a simplified late election for up to five years after death for estates below the filing threshold, which has rescued many families who missed the deadline.

Executors and surviving spouses skip this filing constantly, because the estate seems small and the return seems like a needless expense. Then the survivor's assets double over fifteen years, and the estate ends up taxable with half the exemption gone. For any couple whose combined net worth could plausibly reach the exemption during the survivor's lifetime, filing for portability is cheap insurance.

Portability's limits

The DSUE is not indexed for inflation after it transfers; only the survivor's own exemption grows. The GST exemption is not portable at all. And if the survivor remarries and the new spouse dies first, the first spouse's DSUE is lost. For families with GST goals or very large estates, a credit shelter trust may still be preferable. That is a drafting decision for your attorney.

Who Actually Needs to Plan for Estate Tax

The honest answer is a small minority of households, but it includes many of our clients. The useful test is not net worth today but projected net worth at the second death. A couple with $8 million at 50, saving aggressively, with a 6 percent growth assumption and 35 years of life expectancy, could have well over $50 million by the time the survivor dies. The exemption grows with inflation, but investment returns have historically outpaced it.

Rough categories:

• Clearly below. Combined projected estate under $15 million. Focus on income tax, the step-up in basis, and good documents. File for portability at the first death anyway.
• In range. Projected estate between $15 million and $30 million for a couple. Portability may be enough, but life insurance ownership, charitable intentions, and business growth deserve a closer look.
• Above. Projected estate above the combined exemption, or a single person above $15 million. Lifetime gifting, irrevocable trusts, charitable strategies, and succession planning are on the table.

Business owners and physicians

Owners are the group most likely to be surprised. A practice or company that produces $1 million a year of owner income may appraise at several million dollars, and the value grows with the business. Moving future growth into a trust before a sale is a well-established technique, but it has to happen early. Our guidance for business owners covers the succession side.

Strategies When the Estate Is Taxable

For families above the line, the toolkit is well developed. None of it requires exotic structures, but all of it requires an attorney to draft and a CPA to report.

• Annual exclusion gifts. Each spouse can give the annual exclusion amount to any number of recipients every year without touching the lifetime exemption. A couple with three married children and six grandchildren can move well over $400,000 a year this way.
• Direct payment of tuition and medical expenses. Payments made directly to a school or provider are excluded from gift tax without limit and in addition to the annual exclusion.
• Lifetime use of the exemption. Gifting assets to an irrevocable trust now removes all future appreciation from the estate. The trade-off is losing the step-up in basis on those assets.
• Charitable planning. Donor-advised funds, charitable remainder trusts, and outright bequests reduce the taxable estate dollar for dollar. See our guide to charitable giving tax strategies.

The step-up in basis trade-off

Every gifting strategy runs into the same tension. Assets held until death receive a basis step-up that erases capital gains; assets given away do not. For a family below the exemption, giving away appreciated assets usually trades a zero estate tax for a real capital gains tax later. For a family above it, the 40 percent estate tax typically outweighs the capital gains cost, but the math should be run asset by asset. Cash and high-basis assets are better gifts than low-basis stock.

State Estate Taxes and Georgia

Georgia repealed its estate tax in 2014 and has never had an inheritance tax, so a Georgia resident's estate faces only the federal rules. That changes if you own real estate in another state. Roughly a dozen states plus the District of Columbia impose an estate tax, some with exemptions as low as $1 million, and a handful impose an inheritance tax on the recipient. A lake house in one of those states can trigger a state filing even when no federal tax is due. Our article on Georgia taxes covers the state side more broadly.

Residency itself can be contested. If you split time between Georgia and a high-tax state, that state may argue you were domiciled there at death. Keep clear records of where you live, vote, and keep your primary home.

What to Do Now

The right first step is a projection, not a document. We build a net worth statement that includes life insurance, business value, and retirement accounts, project it forward, and compare it to the exemption path. From there, the conversation with your attorney is specific: whether portability alone is enough, whether life insurance should move to a trust, whether gifting should begin, and how to preserve flexibility if the law changes again.

For married couples, one instruction applies to everyone: make sure your executor knows to file Form 706 at the first death, even when nothing is owed. The IRS estate tax overview explains the filing rules. Our estate and legacy planning service keeps this coordinated over decades, not just at signing.

The federal estate tax exemption is high and, for now, stable. That is good news for most families and a reason for the wealthiest to plan deliberately rather than urgently. Know what is in your estate, project where it is headed, file for portability when a spouse dies, and let the numbers decide whether trusts and gifting belong in your plan.

Tony Colunga · Founder, Attend Wealth

Tony leads Attend Wealth, a fee-based wealth management firm in Atlanta serving professionals, families, physicians, and business owners. Advisory services are held to a fiduciary standard. More about Attend