Estate Tax Alert: New $15 Million Federal Exemption Becomes Law

Due to the One Big Beautiful Bill Act, the federal estate tax exemption will increase to a new, “permanent” $15 million exemption as of January 1, 2026.

At the end of 2025, the historically high gift, estate, and generation-skipping exemption levels of $13.99 million per person (as of 2025), were slated to revert to the pre-2017 Tax Cuts and Jobs Act levels (TCJA) of $5 million per person (plus annual inflation adjustments) due to the sunset provisions of the TCJA.

Per the One Big Beautiful Bill Act (the Act), the new $15 million gift, estate, and generation-skipping exemption amount will continue to be indexed annually for inflation. The increase means that married couples can pass $30 million dollars tax-free beginning in 2026. Since the gift and estate tax exemptions are linked, to the extent that a person makes gifts in excess of their annual gift tax exclusion ($19,000 in 2025), these lifetime gifts will reduce the amount they may leave estate-tax-free at death.

Unlike prior legislation increasing exemption amounts (such as the TCJA), the Act includes no sunset provisions, meaning that there is no need to rush to take advantage of the new, higher amount. However, because any provision of the Act could be amended or repealed at any time in the future, it may be prudent to consider making large gifts during the current administration to take advantage of the current high exemption levels and move assets, and their future appreciation, outside of one’s taxable estate.

Importantly, the Act has no bearing on the states that impose state-level estate taxes. Clients living in or owning property in one of the 12 states (and the District of Columbia) that impose state-level estate taxes should continue to plan for these taxes at death.

HOW WE CAN HELP

Morgan Lewis's private client team has experience in serving the legal and financial interests of high-net-worth individuals and family businesses and is well-positioned to assist with estate planning.

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