The estate tax exemption changed dramatically in 2025, in the opposite direction from what most advisors had anticipated. Rather than reverting to approximately $7 million per person when TCJA provisions expired, the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made the elevated exemption permanent and increased it further. For 2026, the federal estate, gift, and generation-skipping transfer (GST) tax exemption is $15 million per individual, $30 million per married couple, indexed for inflation going forward.
Q3 Advisors helps IRA millionaires and high-net-worth families understand how this landmark change affects their estate plans. For most clients, the $15 million permanent exemption is excellent news. But it does not eliminate the need for estate planning, and for families with larger estates, coordinating the exemption with Roth conversion planning, beneficiary strategy, and charitable giving remains essential.
From TCJA to OBBBA: The New $15 Million Permanent Exemption
The Tax Cuts and Jobs Act of 2017 temporarily doubled the federal estate and gift tax exemption, which reached $13.99 million per individual by 2025. Those provisions were scheduled to sunset at the end of 2025, which would have cut the exemption roughly in half. Instead, Congress passed the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, which made the elevated exemption permanent and increased it to $15 million per individual ($30 million per married couple) effective January 1, 2026, with annual inflation adjustments beginning in 2027.
For families working with Q3 Advisors on estate and legacy planning, this is one of the most consequential legislative changes in decades. The threat of a sudden exemption drop is gone. Planning can now happen on a longer, more stable horizon. The portability election still allows a surviving spouse to use any unused exemption of the deceased spouse, potentially protecting up to $30 million combined.
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How the Estate Tax Works and Who It Affects
The federal estate tax is a transfer tax on the net value of an individual’s taxable estate at death. The tax applies only to estates that exceed the applicable exemption amount. The top estate tax rate is 40%, which applies to the portion of the estate above the exemption threshold.
Currently, very few estates are large enough to owe federal estate tax. The IRS reports that fewer than 0.2% of estates pay federal estate tax at the current exemption levels. Under the $15 million OBBBA exemption, only estates above that threshold face federal estate tax. Individuals with estates below $15 million (or married couples below $30 million with portability) have no federal estate tax exposure.
For IRA millionaires with substantial retirement account balances, this matters even more because IRAs do not receive a step-up in basis at death and generate taxable income when withdrawn by heirs. Combine that with potential estate taxes, and a poorly structured estate can lose a substantial portion of its value to combined federal and state taxes. Understanding how inherited IRA rules and tax strategies interact with estate planning is critical for families with large pre-tax retirement balances.
What the OBBBA Means for Your Estate Plan
The threat of a sudden reversion to roughly $7 million is no longer relevant. Planning now centers on the $15 million permanent exemption and how to use it strategically.
For estates above $15 million, the 40% estate tax still applies to the excess. For example, an estate worth $20 million would have $5 million above the exemption and could owe approximately $2 million in federal estate taxes, before any state estate taxes. Twelve states and the District of Columbia impose their own separate estate taxes with lower exemptions, creating additional exposure for affected families above those state thresholds.
Estate Planning Strategies Under the $15 Million Permanent Exemption
With the $15 million exemption now permanent, the urgency to “use it before you lose it” is gone, but the tools for tax-efficient wealth transfer remain valuable. Annual gifts, trust strategies, and charitable giving continue to reduce taxable estates over time. Notably, under IRS anti-clawback guidance (Revenue Procedure 2022-32), gifts made under the elevated TCJA exemption before 2026 are fully protected, those gifts will not be brought back into the taxable estate even as exemption rules evolve. Consulting a fee-only financial advisor before making large gifts is strongly recommended to ensure the gifts are structured correctly for your overall plan.
Other strategies that continue to be valuable for estate planning include irrevocable life insurance trusts (ILITs) to remove life insurance proceeds from the taxable estate, spousal lifetime access trusts (SLATs) that allow gifts to trusts while maintaining indirect access through a spouse, and charitable trusts and other charitable giving strategies that remove assets from the estate while supporting philanthropic goals. For a deeper look at coordinating these tactics, see our guide to tax-saving tips for estate planning and Roth conversions.
For clients with large IRA balances, Roth conversion planning can reduce the size of a taxable estate while simultaneously creating tax-free assets for heirs. Converting a large traditional IRA to a Roth IRA reduces the IRA balance (subject to estate tax) while moving assets into a Roth that heirs inherit tax-free, subject to the ten-year rule for inherited Roth IRAs. This double benefit makes Roth conversions a particularly powerful tool for estate planning under the new permanent exemption framework.
The Annual Gift Tax Exclusion: A Separate Tool
Separate from the lifetime exemption, each individual can give up to $19,000 per recipient per year in 2026 (indexed for inflation annually) without using any of their lifetime exemption or filing a gift tax return. For married couples using gift-splitting, this doubles to $38,000 per recipient annually.
This annual exclusion is a separate, ongoing provision of the tax code. It provides a reliable way to transfer wealth each year and is often part of a broader strategy that also includes legacy Roth conversion planning for clients who want to leave tax-advantaged assets to the next generation. Over 10 or 20 years, systematic annual gifts can move substantial wealth out of a taxable estate. Charitably inclined families may also want to look at qualified charitable distributions (QCDs) as another way to reduce taxable estate assets while supporting causes they care about.
Frequently Asked Questions
Will my estate owe federal taxes in 2026?
Only if your estate value exceeds $15 million per person (or $30 million per married couple with portability), the permanent exemption established by the OBBBA effective January 1, 2026, indexed for inflation. If your estate is below that threshold, there is currently no federal estate tax exposure. For estates above $15 million, proactive planning with a fee-only advisor remains essential.
Does the OBBBA affect the annual gift exclusion?
No. The annual gift tax exclusion ($19,000 per recipient in 2026) is a separate provision and was not affected by the OBBBA changes to the lifetime exemption. It is adjusted annually for inflation and continues as an independent planning tool.
What is portability and how does it help married couples?
Portability allows a surviving spouse to use the unused portion of a deceased spouse’s estate tax exemption. To claim portability, the executor must file an estate tax return (Form 706) within nine months of death, even if no estate tax is owed. Portability can effectively double the exemption for married couples, but it requires timely and proper filing.
Should I still make large gifts under the new $15M exemption?
Possibly, but the decision depends on your overall financial situation, liquidity needs, and family circumstances. Large gifts are irrevocable. You’ll want to confirm that giving assets away won’t compromise your own retirement security or care needs. While the exemption is now permanent, a future Congress could always change the law, so locking in transfers may still make sense for some families. An advisor who specializes in this area can model out the potential estate tax savings against the cost of giving up access to the assets.
Plan Strategically Under the New $15M Exemption
The estate tax landscape has fundamentally changed in your favor. With a permanent $15 million per person exemption now in place, long-term estate planning is more stable than it has been in decades. Q3 Advisors works with high-net-worth individuals and families to structure estates that minimize transfer taxes, optimize Roth conversions, and create tax-efficient legacies. Learn more about how it works when you start planning with our team.
To start planning, call (720) 730-5650 or reach us through our contact page. You can also explore how legacy Roth conversion planning fits into your estate strategy or learn more about Q3 Advisors and our approach.
