Estate Tax Exemption Raised to $15 Million Under the Big Beautiful Tax Bill: What It Means for Your Estate Plan

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

The newly enacted “Big Beautiful Tax Bill” includes a wide range of updates to the tax code, but one of the most impactful—and underreported—changes is the significant increase in the federal estate tax exemption. Under the new law, the federal estate tax exemption rises to $15 million per person, or $30 million for married couples with proper planning.

This change opens new estate planning opportunities for high-net-worth individuals and families—but it's not as simple as just celebrating the larger exemption. There are still important state-level considerations and planning decisions that need attention.

Let’s walk through what’s changed, what hasn’t, and what you should be doing now to stay ahead.

A Quick Recap: What Is the Estate Tax Exemption?

The estate tax exemption is the amount of an individual's estate that can be passed on to heirs free of federal estate tax. Any amount over the exemption is typically taxed at a flat 40% federal rate.

Before this bill, the federal exemption had been set to sunset at the end of 2025—reverting from its inflation-adjusted ~$13.6 million in 2024 down to about $6 million. But the Big Beautiful Tax Bill not only prevented that sunset, it increased the exemption even further to:

• $15 million per individual

• $30 million per married couple (with proper portability election)

These new levels apply beginning in 2026 and are indexed for inflation going forward.

State Estate Taxes Still Matter

While the federal estate tax exemption is now very generous, it’s critical to remember that many states impose their own estate or inheritance taxes, often with much lower exemption thresholds.

 Here are a few examples:

In states like Massachusetts and Oregon, even moderate estates can trigger a significant tax liability. Also, some states (like New York) have cliff provisions where exceeding the exemption by even a small amount can result in estate tax being applied to the entire estate—not just the portion over the threshold.

Bottom line: Even if you’re under the federal exemption, you may still face state-level estate taxes depending on where you live or own property.

What This Means for Your Estate Planning

The increase to a $15 million federal exemption doesn’t mean you should put your estate plan on the shelf. In fact, now may be the perfect time to refine and optimize your estate strategy.

Here’s what to consider:

1. Leverage Gifting Strategies While the Window Is Open

The $15 million exemption opens the door to making significant tax-free gifts. Techniques like spousal lifetime access trusts (SLATs), grantor retained annuity trusts (GRATs), and intentionally defective grantor trusts (IDGTs) may still be appropriate depending on your goals.

2. Don’t Overlook State-Level Planning

Work with your estate planning attorney to structure your estate to reduce or eliminate state estate tax exposure. This might include retitling assets, setting up trusts, or evaluating residency if you're near retirement.

3. Make Sure Your Documents Are Aligned

Many older estate plans were drafted with lower exemption amounts in mind. If your documents still refer to formulas like “credit shelter amount” or “maximum federal exemption,” you could unintentionally disinherit a spouse or fail to make full use of today’s exemption.

4. Portability Still Matters

Married couples should continue to file a federal estate tax return upon the death of the first spouse to elect portability and lock in both exemptions—especially now that we're talking about $30 million per couple.

The Takeaway

The Big Beautiful Tax Bill gives ultra-high-net-worth families a powerful estate tax planning opportunity. But for many, the state estate tax will continue to be a more pressing issue than the federal threshold.

Whether you’re just above the state threshold or pushing into eight-figure net worth territory, the key is proactive, coordinated planning. A well-structured estate plan not only protects wealth from unnecessary taxation but ensures that it’s distributed in alignment with your legacy goals.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What is the new federal estate tax exemption under the Big Beautiful Tax Bill?
Beginning in 2026, the federal estate tax exemption increases to $15 million per person and $30 million for married couples who elect portability. These amounts will be indexed annually for inflation.

When does the new exemption take effect?
The higher exemption takes effect on January 1, 2026. Until then, the 2024–2025 inflation-adjusted exemption (approximately $13.6 million per person) remains in place.

Wasn’t the federal exemption supposed to decrease in 2026?
Yes. Under prior law, the exemption was scheduled to “sunset” at the end of 2025, reverting to roughly $6 million per person. The Big Beautiful Tax Bill not only prevented that reduction but raised the exemption further to $15 million.

What is the current federal estate tax rate?
Amounts exceeding the exemption are subject to a flat 40% federal estate tax.

Does this change eliminate state-level estate taxes?
No. Many states still impose their own estate or inheritance taxes with much lower exemption limits—often between $1 million and $5 million. States such as Massachusetts, Oregon, and New York have their own rules that can create substantial tax exposure even if you’re below the federal threshold.

How does portability work for married couples?
Portability allows a surviving spouse to use any unused portion of their deceased spouse’s exemption. To take advantage, the estate of the first spouse must file a federal estate tax return (Form 706), even if no federal estate tax is due.

Can I make gifts using the higher exemption before 2026?
The $15 million exemption doesn’t apply until 2026, but you can continue to make gifts under the current (2024–2025) exemption without penalty. If you plan to make large gifts, consider doing so before the law changes to preserve flexibility and confirm how the IRS applies the new thresholds.

How can I reduce or avoid state estate taxes?
Strategies may include establishing or updating trusts, retitling assets, changing residency to a state without estate tax, or leveraging lifetime gifting to reduce your taxable estate. Work with an estate planning attorney familiar with your state’s laws.

Do I need to update my estate planning documents?
Possibly. Older wills and trusts often reference outdated exemption formulas or definitions. Review your plan to ensure it reflects current law and your intentions, especially if it uses terms like “credit shelter trust” or “maximum exemption amount.”

Why is estate planning still important even with a $15 million exemption?
Beyond taxes, estate planning governs how your wealth transfers, protects beneficiaries, and ensures your legacy goals are met. It also addresses incapacity, guardianship, and charitable intentions—issues unaffected by the exemption increase.