Starting January 1, 2026, key federal estate & gift tax laws are set to change significantly. Seniors with sizable estates need to adjust their planning now to lock in current benefits and avoid higher taxes.
1. 💰 Federal Exemption Drops in 2026
- Under the Tax Cuts and Jobs Act (TCJA), the estate & gift tax exemption is currently high—approximately $13.99 M per individual in 2025. :contentReference[oaicite:1]{index=1}
- On January 1, 2026, unless Congress acts, it will revert to pre‑TCJA levels—about $5 M indexed (~$7 M). :contentReference[oaicite:2]{index=2}
- This change could expose millions of dollars to the 40% estate tax rate. :contentReference[oaicite:3]{index=3}
2. 🏛️ Anti‑Clawback Rule Protects Early Gifting
- The IRS confirmed that gifts made from 2018–2025 benefit from the higher exemption, even if it drops in 2026. :contentReference[oaicite:4]{index=4}
- That means senior taxpayers can “lock in” up to ~$14 M exemption by gifting or estate planning before end‑2025.
3. 📈 OBBB Act Raises Exemption & Makes It Permanent
- The “One Big Beautiful Bill” signed July 2025 permanently sets the exemption at $15 M for individuals ($30 M couples), adjusted for inflation. :contentReference[oaicite:5]{index=5}
- This removes the sunset cliff—offering stability if the law stands. But aggressive planning in 2025 is still wise given legislative uncertainty. :contentReference[oaicite:6]{index=6}
4. 👥 Who This Impacts
- High-net-worth retirees with estates approaching $7–14 M must act now, or face potentially millions in tax exposure.
- Mid-affluent seniors ($5–7 M estates) may stay below threshold but could benefit from gifting or trusts to preserve future tax savings. :contentReference[oaicite:7]{index=7}
5. 🧩 Strategies to Consider Before 2026
- Make large lifetime gifts to lock in current exemption without tax, especially on appreciating assets. :contentReference[oaicite:8]{index=8}
- Use annual exclusions ($19K per donee in 2025) to stealthily reduce estate value. :contentReference[oaicite:9]{index=9}
- Establish trusts (e.g. SLAT, dynasty trusts) to shift assets out of estate and control distributions. :contentReference[oaicite:10]{index=10}
- Charitable giving provides estate reduction and tax deductions. Consider donor-advised or remainder trusts.
6. 🧾 Practical Steps Timeline
- Now–Dec 2025: Review estate value and forecast growth.
- By year-end 2025: Implement gifting/trust strategies to crystallize high exemption.
- Early 2026: File required gift tax returns (Form 709) for any large gifts.
- Through 2026+: Monitor OBBB implementation and adjust estate plan per inflation or new law.
7. 📊 Summary Table
| Year | Exemption | Estate Impact | Action Required |
|---|---|---|---|
| 2025 | ~$13.99 M | Current high benefit | Use gifting/trusts now |
| 2026 (No Extension) | ~$7 M | Large estates taxed | Less opportunity—plan ahead |
| 2026+ (With OBBB) | $15 M + inflation | Extended benefit | Reassess as needed |
✅ Final Takeaway
Seniors with estates near current exemption levels must act before end-2025—even if new law may preserve higher limits. Strategic gifting, trusts, and timely filings will lock in tax protection and help preserve wealth for heirs.
