The short answer
The estate tax “sunset” never happened. Instead of falling to roughly $7 million on January 1, 2026, the federal exemption rose to $15 million per person ($30 million for a married couple), and the law made it permanent and indexed it to inflation.
For 2027, the exemption is expected to rise again, to roughly $15.4 million per person, once the IRS publishes its annual inflation figures, typically in late October or November. Above the exemption, the tax is still 40%.
So why plan before December 31? Because the annual gift exclusion resets every January, today's higher interest rates favor some strategies and penalize others, and families above $30 million still face a 40% tax on everything over the line. Here is what to do with the last weeks of 2026, and what to plan for in 2027.
The numbers: 2026 now, 2027 next
The One Big Beautiful Bill Act, signed July 4, 2025, replaced the scheduled 2026 cut with a permanent $15 million exemption, indexed for inflation starting in 2027 (Mintz).
Instead of falling to about $7 million, the exemption rose to $15 million
Federal estate and gift tax exemption per person, $ millions. Double it for a married couple.
View chart data
| Year | Exemption ($ millions) | Status |
|---|---|---|
| 2018 | 11.18 | Reported |
| 2019 | 11.40 | Reported |
| 2020 | 11.58 | Reported |
| 2021 | 11.70 | Reported |
| 2022 | 12.06 | Reported |
| 2023 | 12.92 | Reported |
| 2024 | 13.61 | Reported |
| 2025 | 13.99 | Reported |
| 2026 | 15.00 | Reported |
| 2027* | 15.40 | Projected |
IRS amounts 2018–2026; 2027 projected; old-law sunset estimate per RS Capital.
| Item | 2026 (in effect now) | 2027 (projected) |
|---|---|---|
| Estate and lifetime gift exemption, per person | $15,000,000 | About $15.4 million |
| Same, married couple | $30,000,000 | About $30.8 million |
| GST tax exemption, per person | $15,000,000 | About $15.4 million |
| Annual gift exclusion, per recipient | $19,000 | $19,000 or $20,000 |
| Top estate and gift tax rate | 40% | 40% |
2026 figures from IRS Rev. Proc. 2025-32 as reported by Moran Insurance Group and Thomson Reuters. 2027 figures are projections; as of late October 2026 the IRS had not released them. The annual exclusion only moves in $1,000 steps, and analysts project $20,000 for 2027 (Farm CPA Report).
Myth vs. reality: what outdated articles still say
Many estate planning pages were written before July 2025 and never updated. If you read one of them, here is what has changed.
| What older articles say | What is true for 2026 and 2027 |
|---|---|
| “The exemption drops to about $7 million on January 1, 2026.” | It rose to $15 million on January 1, 2026, and is expected to be about $15.4 million in 2027 (RS Capital). |
| “Use it or lose it: make big gifts before the sunset.” | There is no deadline. The exemption is permanent and grows with inflation. |
| “Gifts made before 2026 could be clawed back.” | The IRS already protected those gifts, and with no cut in 2026 the issue is moot (IRS Estate and Gift Tax FAQs). |
| “Wait and see what Congress does.” | Congress acted. The current rules have no expiration date. |
| “Estate planning is only for the very wealthy now.” | Below $15 million, the focus shifts to income tax: basis step-up, trust taxes and California property tax. |
Your year-end checklist: before December 31, 2026
The permanent exemption removed the deadline pressure, but several annual opportunities still expire when the calendar turns.
Use your 2026 annual exclusion. Give up to $19,000 per recipient ($38,000 from a married couple) without touching your lifetime exemption. Unused amounts do not carry over to 2027.
Superfund a 529 plan. Front-load five years of annual exclusions into a grandchild's 529: up to $95,000 per beneficiary, or $190,000 from a couple. Each spouse files a Form 709 to make the five-year election (Saving for College).
Pay tuition and medical bills directly. Payments made straight to a school or medical provider are unlimited and do not count against any exclusion.
Re-read wills and trusts drafted for the sunset. Formula clauses written to fund a bypass trust “up to the exemption” may now push far more into that trust than intended, or leave a surviving spouse short.
Check for a missed portability election. If a spouse died in the last five years and no estate tax return was filed, the estate can still file Form 706 to pass the unused exemption to the survivor (Journal of Accountancy).
Time your charitable gifts. New 2026 rules reduce the value of charitable deductions for itemizers, so bunching several years of giving into one year, or into a donor-advised fund, can stretch the deduction further.
Get valuations in place. Gifts of private company or real estate interests need a qualified appraisal; ordering it now lets you close gifts before year-end.
Set your 2027 plan. Budget for the higher 2027 exemption and annual exclusion once the IRS confirms them, and schedule January gifts so you use the new exclusion early.
Which strategies fit your estate size in 2027
With $30 million sheltered for a married couple, the question is no longer whether you will owe estate tax but how much your estate will grow beyond the line over your lifetime.
The right tools depend on how far your estate sits above $30 million
Larger estate
- GRATs and installment sales to grantor trusts
- Family partnerships and valuation discounts
- Dynasty trusts, plus life insurance or PPLI held in trust
- Spousal lifetime access trusts (SLATs)
- Annual exclusion and 529 gifts every year
- GST-exempt dynasty trusts for grandchildren
- Hold appreciated assets for the step-up in basis
- Revocable trust, portability and beneficiary forms
- California property tax (Prop 19) planning for real estate
Strategy tiers by estate size: married couple, 2026 exemption.
A $25 million estate growing at 6% a year passes $30 million in about three years and $60 million in about 15. Plan for the estate you will have, not the one you have today.
The 2027 strategy menu, and how today's rates change it
Interest rates matter as much as the exemption. The IRS Section 7520 rate, which values many trust interests, was 5.6% for October 2026 (IRS Rev. Rul. 2026-19). Some strategies work better at that level and some work worse.
| Strategy | What it does | Uses your exemption? | Effect of today's higher rates |
|---|---|---|---|
| Spousal lifetime access trust (SLAT) | Moves assets out of your estate while your spouse can still receive distributions | Yes | Neutral |
| Dynasty / GST-exempt trust | Shelters assets from estate tax for multiple generations | Yes, plus GST exemption | Neutral |
| Life insurance trust (ILIT) or PPLI in trust | Provides tax-free liquidity to pay estate tax or replace gifted assets | Only for premiums | Neutral |
| Qualified personal residence trust (QPRT) | Gives a home to heirs at a discounted gift value | Yes, at a discount | Helped: a larger discount |
| Charitable remainder trust (CRT) | Converts appreciated assets into income, remainder to charity | No | Helped: a larger deduction |
| Grantor retained annuity trust (GRAT) | Passes growth above the IRS rate to heirs, often gift-free | Little or none | Hurt: assets must beat a 5.6% hurdle |
| Installment sale to a grantor trust | Freezes an asset's value; growth passes to heirs | Seed gift only | Hurt: a higher interest rate on the note |
| Charitable lead annuity trust (CLAT) | Pays charity first, then passes the rest to heirs | Reduced | Hurt: less passes to heirs |
| Intrafamily loans | Lends to children at the IRS minimum rate | No | Hurt: higher required interest |
The takeaway for 2027: rate-neutral tools such as SLATs and dynasty trusts, plus rate-favored tools such as QPRTs and CRTs, deserve a fresh look. GRATs still work for assets expected to grow quickly, such as pre-IPO shares.
The California angle
No state estate or inheritance tax. California does not tax estates or inheritances, so for Californians the federal exemption is the only death-tax line that matters. Families who move to a state with its own estate tax face a much lower line: about $3 million in Washington, $1 million in Oregon and $7.35 million in New York for 2026 (Creative Planning).
Property tax is the hidden estate tax. Under Proposition 19, a parent can pass a family home to a child without a full property tax reassessment only if the child makes it their principal residence, and only up to the home's taxable value plus a set amount. That amount is $1,044,586 for transfers through February 15, 2027, when the Board of Equalization will adjust it again (California BOE). Prop 19 eliminated the separate exclusion for other property, so rental and vacation properties passed to children are generally reassessed to market value, which can multiply the annual tax bill (Greenberg Glusker).
Community property doubles the step-up. When the first spouse dies, both halves of community property can receive a new basis, erasing the built-in capital gain on the whole asset (IRS Publication 555). For estates under $30 million, keeping appreciated assets as properly titled community property can save more tax than any gifting strategy.
Trust income tax still bites. Since 2023, California treats incomplete-gift non-grantor trusts (INGs) as owned by the California grantor, so they no longer shift investment income out of the state's 13.3% reach (PwC). Completed-gift trusts with non-California trustees and beneficiaries can still reduce state income tax, but they must be designed carefully.
What “permanent” really means for 2027 and beyond
“Permanent” means the law has no built-in expiration date. It does not mean the rules can never change: any future Congress can amend the exemption, the 40% rate or the rules for trusts.
That is why well-drafted plans stay flexible. Trust protectors, powers to change trustees or situs, and formula clauses tied to “the exemption in effect at death” let a plan adapt without being rewritten. Gifts completed under today's rules are protected by IRS anti-clawback regulations even if the exemption later falls (IRS Estate and Gift Tax FAQs).
A practical rhythm: review your plan every year-end, when the new inflation figures arrive, and after any major life or liquidity event.
FAQ
What is the estate tax exemption for 2026?
$15 million per person, or $30 million for a married couple. Estates above that amount pay a 40% federal tax on the excess.
What will the estate tax exemption be in 2027?
It is projected at about $15.4 million per person, because the law now indexes the exemption to inflation. The IRS typically confirms the figure in late October or November.
Did the estate tax exemption sunset in 2026?
No. The One Big Beautiful Bill Act replaced the scheduled drop with a permanent $15 million exemption starting January 1, 2026.
What is the annual gift tax exclusion for 2026 and 2027?
$19,000 per recipient in 2026. Analysts project $20,000 for 2027, pending IRS confirmation.
Do I still need to make gifts before year-end?
There is no sunset deadline anymore, but each year's annual exclusion expires on December 31. Using it every year moves money out of your estate without using any of your lifetime exemption.
Does California have an estate tax?
No. California has no estate or inheritance tax, but Proposition 19 can raise property taxes when real estate passes to children.
Is the exemption really permanent?
It has no expiration date, but Congress can change it. Flexible trust provisions help a plan adapt.
Important Disclosures
Source: Gideon Strategic Partners, Important Disclosures (effective April 1, 2026).
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Sources
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