Last Updated: April 2026
The Tax Cuts and Jobs Act of 2017 temporarily doubled the federal estate and gift tax exemption — the amount you can transfer free of federal estate or gift tax during your lifetime or at death. In 2026, that exemption is $13,610,000 per person. On January 1, 2027, when the TCJA expires, the exemption reverts to its pre-2018 level adjusted for inflation — approximately $7,000,000 per person. For a married couple, the combined exemption drops from $27,220,000 to approximately $14,000,000. Estates that are below the radar today may have a significant estate tax liability in 2027. This guide explains who is affected, by how much, and the key strategies to act on before December 31, 2026.
The following strategies allow you to use the current higher exemption before it expires. All should be implemented with an estate planning attorney — these are not DIY projects.
A SLAT is an irrevocable trust created by one spouse for the benefit of the other spouse (and potentially children/grandchildren). The donor spouse transfers assets — using up to $13.6M of lifetime exemption — to the SLAT. The assets are out of the donor's estate. The beneficiary spouse can receive distributions from the trust, maintaining indirect access to the funds. A married couple can create two SLATs — each spouse creating one for the other — effectively using both spouses' exemptions. Risk: if the beneficiary spouse predeceases the donor spouse, access to trust funds ends. Best for: married couples with $14M–$27M estates who want to use both exemptions while maintaining some access to funds.
A GRAT is an irrevocable trust where the grantor retains a fixed annuity payment for a term of years. At the end of the term, any remaining assets pass to beneficiaries estate-tax-free. If trust assets grow faster than the IRS 7520 rate (an assumed rate of return), the excess appreciation passes to heirs without using any exemption. Zero-out GRATs (where the annuity is set so the expected gift value is near $0) are particularly powerful in low-interest-rate environments. Best for: high-net-worth individuals with appreciated assets expected to outperform the IRS hurdle rate.
An ILIT holds a life insurance policy outside your taxable estate. At death, the insurance proceeds are paid to the trust (not your estate) and pass to beneficiaries without estate tax. Using annual exclusion gifts to fund premium payments keeps the premiums out of the estate. If you need life insurance for liquidity at death (e.g., to pay estate taxes on illiquid assets like real estate or a business), the ILIT is the standard mechanism. Best for: high-net-worth individuals with illiquid estate assets who need death benefit proceeds to avoid forced asset sales.
The simplest strategy: use your remaining lifetime exemption to make outright gifts to children or other heirs before December 31, 2026. No trust required. Gift the maximum under your remaining exemption. Assets leave your estate permanently. Recipients receive a carryover basis (not a step-up at death) — so capital gains on appreciation accrue to them. Best for: simple estates, strong family trust, liquid assets without unrealised gains (cash, money market funds).
For those with highly appreciated assets and charitable intent: a CRT transfers appreciated assets to a trust, provides you with an annuity income stream for life or a term, and leaves the remainder to a charity. You get an immediate charitable deduction, avoid capital gains on the transfer, and reduce your estate. Assets above the charitable remainder pass outside your estate. Best for: philanthropically inclined high-net-worth individuals with low-basis appreciated assets.
Estate planning strategies take time — legal documents must be drafted, reviewed, and executed; trusts must be funded with assets. Starting in April 2026 gives you approximately 8 months. Recommended timeline:
Calculate your current taxable estate: add up all assets (home equity, investment accounts, retirement accounts, business interests, life insurance death benefits) and subtract debts. Determine how much remaining lifetime exemption you have (subtract prior taxable gifts from $13.61M). Engage an estate planning attorney and CPA. Set strategy based on estate size, liquidity, family structure, and charitable goals.
Attorney drafts trust documents (SLAT, GRAT, ILIT, or other structures). Review and revise. Finalise with beneficiary designations, trustee selections, and funding mechanics.
Execute trust documents. Transfer assets into trusts (funding). For direct gifts: transfer cash, securities, or other assets to recipients. Make annual exclusion gifts by December 31. Document all transactions with professional appraisals for any non-cash transfers (required for gift tax reporting).
Report all taxable gifts on Form 709 (Gift Tax Return) by April 15, 2027 (extended to October). Document use of lifetime exemption. This creates a permanent record of your exemption usage under current law.
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Using the 2026 estate tax exemption — SLATs, GRATs, direct gifting, ILIT setup — requires coordinated CPA and estate attorney guidance. TaxHub connects you with high-net-worth tax specialists.
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Get Estate Tax Planning Help Before 2027 →IRS Final Regulations (TD 9884, 2019) provide that if a donor made gifts that used the TCJA-increased exemption and the donor dies after 2025 when the exemption is lower, the IRS will calculate the estate tax credit using the higher of: (a) the exemption at death, or (b) the exemption used at the time of the gift. In practical terms: if you give away $13M in 2026 using today's exemption, when you die in 2030 under the lower $7M exemption, the IRS will still credit your estate for the full $13M that was gifted. No additional estate tax is owed on the 2026 gifts. This regulation gives legal certainty to 2026 gifting strategies.
This is uncertain. The Trump administration supports extending TCJA provisions, and Republicans control Congress as of 2026. However, the revenue cost of a permanent increase to the estate tax exemption is approximately $200 billion over 10 years, creating budget challenges even with Republican support. History suggests partial extensions are common — individual income tax rates may be extended while estate tax provisions are modified or allowed to expire. You should plan for the sunset actually occurring. If Congress extends the exemption, any 2026 gifting strategy you implemented is simply not needed — you do not lose anything by having made the gifts.
No — the anti-clawback rule protects all gifts made under the TCJA higher exemption (2018–2026). If you made a $10M gift in 2022 and used $10M of exemption at that time, that gift is protected. Your remaining 2026 exemption is $13.61M - $10M = $3.61M. Your estate at death will receive credit for the full $10M exemption used in 2022, even if you die after 2026 under the lower exemption. Review your prior gift tax returns (Form 709) to determine how much of your lifetime exemption you have already used.
Under the 2026 exemption ($13.61M single), your $10M estate has no federal estate tax liability. Under the 2027 exemption (~$7M single), your $10M estate would potentially owe 40% tax on $3M above the exemption = $1.2M in federal estate tax. Yes — you are significantly affected. Planning to use 2026 gifting strategies to reduce your taxable estate below $7M, or to transfer the excess to trusts or heirs, can eliminate this $1.2M exposure entirely. For a married couple with a $10M estate, portability allows the surviving spouse to use both exemptions — potentially keeping the estate below even the 2027 exemption if properly planned.
Portability allows a surviving spouse to use the unused federal estate tax exemption of their deceased spouse. If Spouse A dies in 2027 having used only $2M of their exemption, Spouse B can 'port' the remaining $5M of Spouse A's exemption (under the 2027 ~$7M limit), giving Spouse B an effective exemption of approximately $12M. Portability is not automatic — it must be elected on a timely filed estate tax return for the first spouse's estate (Form 706). Key limitation: portability only applies to the most recently deceased spouse's unused exemption. Strategic planning using 2026's higher exemption through trusts (rather than portability) is generally more powerful for very large estates.
Yes — the full value of traditional IRA and 401(k) accounts is included in your taxable estate for federal estate tax purposes, even though beneficiaries must also pay income tax when they withdraw the funds (the double-tax trap). Roth IRAs are also included in your taxable estate but beneficiaries pay no income tax on withdrawals. For large estates with significant retirement account balances, estate tax planning for IRAs requires careful coordination with income tax planning — strategies include naming a charitable remainder trust as IRA beneficiary, making Roth conversions during your lifetime to reduce the IRA balance included in the estate, or using the IRA for charitable bequests (charities pay no estate or income tax on inherited IRA distributions).