The New Federal Estate Tax Exemption: What It Means for Estate Planning
Federal estate tax laws are changing again, and the updates could significantly affect long-term estate planning strategies for high-net-worth individuals and families.
Recent federal legislation increased the federal estate and gift tax exemption to $15 million per person beginning in 2026, meaning a married couple could potentially transfer $30 million or more to heirs without federal estate tax, assuming proper planning and portability elections.
While this higher exemption will reduce federal estate tax exposure for many families, it does not eliminate the need for careful planning—particularly for individuals with significant assets or those living in states with their own estate tax rules.
A Brief Look at the Estate Tax Exemption
The federal estate tax exemption determines how much wealth a person can transfer during life or at death without paying federal estate tax.
The exemption has increased dramatically over the past decade:
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2017: approximately $5.49 million per person
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2018–2025: increased under federal tax reform and adjusted for inflation
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2025: about $13.99 million per person
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2026: expected to rise to $15 million per person under the new law
Any assets transferred above the exemption may be subject to the federal estate tax, which can reach 40%.
For married couples, proper planning can allow the use of both spouses’ exemptions, effectively doubling the amount that can pass to heirs without federal estate tax.
Why the 2026 Change Matters
The estate tax exemption has been a moving target for years. Earlier tax laws scheduled a major reduction in 2026, potentially cutting the exemption roughly in half.
Instead, new legislation increased the exemption to $15 million and indexed it for inflation going forward, providing more certainty for estate planners and families.
This change means:
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Fewer estates will be subject to federal estate tax
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Individuals can transfer more wealth tax-efficiently
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Lifetime gifting strategies may become more flexible
However, federal tax law can change again, which means long-term planning remains important.
Minnesota Residents Should Still Plan Carefully
Even with the increased federal exemption, Minnesota residents should remember that state estate tax rules are different from federal law.
Minnesota currently imposes its own estate tax with a much lower exemption threshold, meaning some estates may owe Minnesota estate tax even when no federal estate tax is due.
This makes coordinated planning particularly important for Minnesota families with significant assets.
Estate Planning Opportunities to Consider
Higher exemption amounts may create planning opportunities, including:
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Lifetime gifting strategies to transfer appreciating assets
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Irrevocable trusts designed to remove assets from a taxable estate
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Spousal lifetime access trusts (SLATs) or other advanced planning tools
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Reviewing existing estate plans drafted under older tax rules
Estate planning documents created years ago may not reflect current tax laws or family circumstances.
Reviewing Your Estate Plan
Tax laws evolve, and estate plans should evolve with them. Even individuals who previously believed their estate was below federal tax thresholds may benefit from reviewing their plan.
An updated estate plan can help ensure that wealth transfers efficiently, family goals are honored, and tax exposure is minimized where possible.
If you have questions about how the new federal estate tax exemption may affect your estate plan, our office would be happy to discuss your options and help you review your existing documents. Contact us today to schedule a consultation.
