Review the enacted $15 million 2026 basic exclusion, portability and prior gifts. Keep beneficiaries, incapacity, state rules and estate liquidity in the plan.
July 14, 2025 · Financial Forte Staff
Historical article: prepared retrospectively using information available as of July 14, 2025.
The July 4 tax law changes a major assumption in federal estate planning. The basic estate and gift tax exclusion will be $15 million per person beginning in 2026, with inflation adjustments after that. Families who were planning around the previously scheduled reduction should revisit those projections.[1]
A higher exclusion can reduce federal transfer-tax concerns for many households. It does not answer who receives the assets, who can act during incapacity or whether the family will have the cash and instructions needed to carry out the plan. Review the tax assumptions and the personal intentions together before deciding that documents or existing arrangements are no longer necessary.
Apply the new amount to the right date
The $15 million basic exclusion applies to estates of people dying and gifts made after December 31, 2025. It does not retroactively replace the applicable 2025 exclusion. Prior taxable gifts, deductions and other facts can affect the amount available in an actual estate calculation.[1]
The exclusion is not a separate fresh allowance for every gift and another unrelated allowance at death. The federal estate and gift tax framework coordinates lifetime transfers with the estate calculation. A gift above an annual reporting exclusion can use part of the available lifetime amount without immediately producing tax, depending on the facts.[2]
Ask the attorney and tax preparer which parts of an existing plan were designed around the anticipated change in federal law, including formula provisions that may allocate assets differently as the exclusion changes. Some provisions may still serve important purposes. Others may create restrictions or administrative costs that deserve a fresh look now that the assumptions have changed.
Do not unwind an irrevocable arrangement or make a large new gift solely because the headline number is different. Legal authority, tax consequences, basis, access to assets and family intentions all need review before acting.
A couple's combined wealth is not an automatic joint exclusion
Isabel and Marcus are a hypothetical married couple with $18 million of combined assets, owned equally for this simplified example. Assume they are U.S. citizens and are reviewing possible events in 2026. Each person's $9 million balance is below the new $15 million basic exclusion, but ownership after the first death can change the analysis.
If one spouse dies and all assets pass outright to the survivor, the survivor may then hold $18 million, ignoring costs, changes in value and other adjustments. Compared with a single $15 million basic exclusion, that is a $3 million difference. It is not a calculation of estate tax owed; it identifies why the survivor's plan still requires attention.
Portability may allow a surviving spouse to use a deceased spouse's unused exclusion, but it is not automatic simply because the couple was married. The deceased spouse's executor generally must make the election on an estate tax return under the applicable requirements. The actual unused amount and availability depend on the facts. Ask who will prepare the return and track the election deadline, even if no federal estate tax appears payable at the first death.[3]
Isabel and Marcus should ask whether their plan relies on portability, a trust arrangement or another structure, and who will make sure the necessary steps occur. They should also compare flexibility, administration and non-tax goals. A larger exclusion does not make those choices identical.
Keep the non-tax reasons for planning visible
A household well below the federal exclusion may still need a will, appropriate powers of attorney, healthcare directives and coordinated beneficiary designations. Those tools address authority and distribution, not merely federal estate tax. The required documents and their operation depend on state law and the household's circumstances.[4]
For example, a family with a $2 million home and $1 million of other assets may have a relatively modest federal transfer-tax concern under the new framework. The combined value is $3 million, but it can still face a difficult practical problem if one child wants to keep the home, another expects cash and the documents do not explain how to resolve the difference.
Similarly, a surviving spouse's support needs may conflict with an intention to preserve assets for children from a prior marriage. A beneficiary form that leaves an account outright can produce a different result from an arrangement that provides support and identifies later recipients. The attorney should explain what the documents actually accomplish.[5]
Review state estate or inheritance taxes separately. State rules do not necessarily follow the federal exclusion. Property in another state, a move or a change in family residence can make that review more important. Do not assume that a federal threshold resolves every transfer-tax issue.
Revisit liquidity, records and decision-makers
An estate can contain substantial value without having much accessible cash. Real estate, a closely held business and restricted assets may be difficult to sell quickly. Consider how expenses, debts and any taxes would be paid without forcing an unwanted sale.
Review the people named to act. An executor, trustee and agent under a power of attorney perform different roles, and the same person may not be the best choice for all of them. Confirm willingness, competence, availability and any potential conflict. A trusted contact on an investment account is not a substitute for legal authority.[4]
Keep records of prior gifts and the location of estate documents. Beneficiary changes should be confirmed with the relevant institution, and trust funding should be checked rather than assumed from the existence of a signed trust document.[5]
The next step is a focused review of what the new law changes and what it leaves unresolved. Ask for a plain-language explanation of the intended transfers, the tax assumptions and the actions required after a death or incapacity. A dependable estate plan still needs to work for the people involved, even when the federal exclusion is much larger.
Related reading
- An Estate Review for People Who Do Not Expect Estate Tax
- Estate Documents Are Only Useful if People Can Find Them
Have more questions about estate planning and beneficiary coordination after tax-law changes? Complete the Financial Forte questionnaire to get started on connecting with an advisor who can help answer your questions and explore next steps.
The contact invitation is current; it does not imply this contact path existed on the historical reference date.
Educational information, not personalized investment, tax, legal or benefits advice. Examples use hypothetical assumptions. Verify current rules and your circumstances before acting.
Sources
- [1] Public Law 119-21 — Section 70106: Estate and gift basic exclusion — July 4, 2025
- [2] IRS Instructions for Form 709 — August 18, 2023 footer; November 27, 2023 PDF modification; 26 U.S.C. 2010: Unified credit and portability election — 2023 Code
- [3] 26 U.S.C. 2010: Unified credit and portability election — 2023 Code
- [4] CFPB/SEC: Planning for Diminished Capacity and Illness — July 2021
- [5] CFPB: Help for Trustees Under a Revocable Living Trust — October 2013; release October 29, 2013; What You Should Know About Your Retirement Plan — September 2021 edition
