Federal estate taxes are a critical concern for clients with large estates, often managed through advanced tax planning strategies like the lifetime estate and gift tax exemption. This exemption allows you to pass a specified amount of assets to your heirs without incurring federal estate taxes, which can be as high as 40% for gifts or estates exceeding the exemption limit. Estate taxes can significantly affect how much you leave to your heirs, so proactively managing high taxes is essential to protecting your legacy.
However, anticipated changes in 2026 may change this exemption, affecting high-value estates. Will upcoming estate tax exemption changes impact you? Let’s explore the details.
What is the Estate Tax Exemption?
As of 2024, the current lifetime estate and gift tax exemption is $13.6 million per person. The exemption allows individuals to give up to that amount to whichever recipients they choose during their lifetime without incurring taxes. Couples who have undergone advanced financial planning, such as establishing trusts, may gift around $27 million.
However, the current lifetime estate and gift tax exemption limits expire in 2026. Without Congressional action, it will drop to approximately $6.8 million per person or $13.6 million for couples.
Lifetime Estate and Gift Tax Exemptions:
Who Will the Changes Impact?
If your estate’s value is less than $6.8 million, the change in 2026 should not affect you. It’s important, however, to consider how the total value of your estate is calculated, considering all real estate, investment assets, and personal property.
Changes will likely affect clients with estates above $7 million. We recommend working with a trusted advisor to explore various scenarios and future outcomes and take action now to ensure your assets are distributed according to your wishes.
Do you need help navigating estate planning concerns and adapting your plans as laws evolve? Complete our financial assessment to help us better understand your unique situation and needs so we may provide tailored support.
Audio Transcript:
Mark Duvall (00:00 – 01:52):
There’s a probable coming change in the estate tax exemption. What does that change? And then does it even matter to you? I’m Mark Duvall of Opes Wealth Management. First a definition. The estate tax exemption is the amount that can pass to heirs without paying estate taxes, which is a federal tax that tops out at 40% on asset values above that exemption.
So what is the current exemption? It’s $13.6 million per person. And if a couple has done the appropriate type of estate planning, then that could exempt $27 million from estate taxes. But in 2026, unless Congress can come to an agreement, that gets cut in half. And so the exemption amount with planning and a trust in place would be $13.6 million.
And if that planning hasn’t been done, it would be $6.8 million. So does this even matter to you? If your total asset value is below $7 million, you can probably ignore this. But remember, total asset value includes all the value of your real estate, including your home, all your assets, and all your personal property. And if it’s above that, then it’s good to work with your financial advisor, project out into the future, and find out what actions you can take — starting now — that can help ensure your hard-earned assets go to who you want them to go to.
Written by: Mark Duvall
Opes Wealth Co-President Mark Duvall has over 30 years of experience guiding clients through financial planning, complex trusts, and real estate issues such as developing and updating estate planning strategies and implementing tax-efficient methods to reduce estate tax exposure and liability.
