2026 Federal Estate and Gift Tax Exemption Amounts: What Families Need to Know

2026 Federal Estate and Gift Tax Exemption Amounts: What Families Need to Know

The federal government has announced the estate and gift tax exemption amounts that will apply in 2026. The changes provide continued opportunities for individuals and families to transfer significant wealth with little or no federal transfer tax exposure.

Increased Lifetime Estate and Gift Tax Exemption

For 2026, the federal basic exclusion amount—the amount an individual can transfer during life or at death without incurring federal estate or gift tax—has increased to $15 million per person, up from $13.99 million in 2025. Married couples may be able to shield up to $30 million through proper planning and portability elections.

This exemption applies collectively to taxable lifetime gifts and assets transferred at death. Individuals who make gifts exceeding the annual exclusion amount may reduce their remaining lifetime exemption but generally will not owe gift tax until the lifetime exemption has been exhausted.

Annual Gift Tax Exclusion Remains at $19,000

The annual gift tax exclusion remains $19,000 per recipient for 2026. This means an individual may give up to $19,000 to any number of recipients during the year without using any portion of the lifetime exemption and without filing a gift tax return.

For married couples who elect gift splitting, the annual exclusion effectively doubles to $38,000 per recipient.

For example, a married couple with three children could transfer up to $114,000 in 2026 ($38,000 × 3) without reducing either spouse's lifetime exemption.

Other Important Exceptions

Certain transfers are generally excluded from gift tax regardless of amount, including:

• Direct payments of tuition to educational institutions.

• Direct payments of qualifying medical expenses to healthcare providers.

• Gifts to a U.S. citizen spouse.

• Gifts to qualified charitable organizations.

Because these transfers do not consume annual exclusion amounts or lifetime exemption amounts, they can be powerful wealth-transfer strategies.

Estate Planning Opportunities

The increase in the federal exemption provides substantial flexibility for high-net-worth individuals and families. Common planning opportunities may include:

• Utilizing annual exclusion gifts to children, grandchildren, and other beneficiaries.

• Funding irrevocable trusts for future generations.

• Leveraging valuation discounts and other advanced estate-planning techniques.

• Reviewing existing estate plans to ensure they reflect current exemption amounts and family objectives.

Although relatively few estates are subject to federal estate tax under current law, state estate or inheritance taxes may still apply depending on the taxpayer's state of residence.

Portability Election Can Preserve a Deceased Spouse's Unused Exemption

Married couples should pay particular attention to the federal estate tax portability rules. Portability allows a surviving spouse to utilize the deceased spouse's unused estate and gift tax exemption, commonly referred to as the Deceased Spousal Unused Exclusion (DSUE) amount. By making a timely portability election, a surviving spouse may preserve millions of dollars of additional transfer tax exemption that can later be used for lifetime gifts or transfers at death. For many families, portability can effectively increase the amount that passes free of federal estate tax to as much as $30 million in 2026. Importantly, portability is not automatic. The election generally must be made by filing a federal estate tax return (Form 706) for the deceased spouse, even when no estate tax is due. The portability election must generally be filed within five years of the decedent's death for estates not otherwise required to file an estate tax return. Failure to timely file can result in the permanent loss of the deceased spouse's unused exemption amount, making it critical for surviving spouses and their advisors to evaluate portability soon after a death occurs.

Disclaimer: This publication is for informational purposes only and does not constitute legal or tax advice. Readers should consult their professional advisors regarding the application of these rules to their particular circumstances. Prior results do not guarantee a similar outcome, and receipt of this publication does not create an attorney-client relationship. This publication was drafted using the assistance of ChatGPT.

Estate Planning during Covid-19

Over the past year and a half, the world has been experiencing challenging, unprecedented, and frightening times. The difficulties we have all faced in not being able to see our loved ones as we once could, socially isolating ourselves, and having to learn to function in a new, virtual, socially-distanced world with new rules can feel unnatural and uncomfortable. The availability of vaccines and the slow return to normal life has been an encouraging and hopeful light at the end of the tunnel. Nonetheless, with Delta variant cases on the rise, and potentially other variants on the horizon, we all (vaccinated and unvaccinated) need to remain vigilant as we continue to try to live our best lives under these circumstances, and continue to spend more and more time with friends and loved ones. Part of being vigilant is to properly plan for the unexpected. A well thought out estate plan contributes to the peace of mind that we all seek these days.

As we all continue on the path back to normal life, this might be a good time to make sure that your estate plans are up to date, particularly your Advance Health Care Directive (AHCD) and HIPAA Authorization. If you ever become incapacitated and cannot consent to medical procedures yourself, your healthcare agent who you’ve named in your AHCD can step in and make such decisions for you. Through your AHCD, your agent can also make sure that your end-of-life and organ donation instructions are properly followed. In order for your agent to be able to step in for you if needed, a HIPAA Authorization allows them access to your medical records to be able to prove whether or not your are in fact incapacitated.

Additionally, now would be a good time to make sure that your revocable living trust is up to date (or to make sure you have one). Sadly, when people neglect to update their trusts to reflect their current wishes or needs, or to make sure the trust is up to date with current law, then problems might arise during the administration of the trust, which could sometimes lead to unintended probate or litigation.

Finally, it is important to remember that unexpected circumstances (such as the virus) do not discriminate. That being said, proper planning is beneficial for every adult, regardless of age. Given the challenges and anxiety we are all facing during this Covid-19 pandemic era, it is a good time for young families to think about guardianship for minor children, as well as anyone with pets to think about their well-being. Nothing says peace of mind more than knowing that your wishes for your minor children have been properly documented through a valid Will and Living Trust. Equally, a properly drafted Pet Trust would ensure that your pets are well taken care of should you no longer be in a position to do so yourself.

The Law Offices of Michael S. Demian is here to offer you compassionate and knowledgeable legal counseling, and help you to achieve peace of mind through a properly well-drafted estate plan customized to meet your needs and desires, as well as those of your loved ones.

Contact us now for a FREE AND REMOTE initial consultation.

Tip #1 - Have a Plan for Incapacity, not just Death

It’s an all too real scenario that many people face – parents who are growing older without an estate plan, and don’t believe in sharing their financial information with their middle-aged children. A few years ago, in the Wall Street Journal’s edition of its Wealth Management section, news editor William Power wrote a compelling and personal article about he and his wife’s struggles as they were forced to filter through hundreds of his incapacitated parents-in-law’s financial history in order to figure out what assets they had in a myriad of places; these included bank accounts, retirement accounts, safe deposit boxes, hidden boxes of coins, and even notes of scrap paper in various handbags. The nightmare of dealing with financial institutions without the proper written authority in place, such as a named attorney-in-fact through a statutory or durable power of attorney, or named trustee through a valid revocable living trust, is a situation that is a reality for many people – and will continue to be so for children of baby-boomers who will enter their retirement and post-retirement stages in life. 

The patience and determination that Mr. Power and his wife Julie endured are admirable. However, many if not most individuals who unexpectedly find themselves in similar unfortunate situations will either not have the time to dig into the financial history of their parents, will live too far away or be too busy to have the wherewithal to deal with the situation, or both. As Mr. Power well described it, “Imagine being dropped in someone’s living room and being told, “Here you go, you’re running their house now.”” Most of us wouldn’t know the first thing about where to begin and how and why. Which of these file cabinets do we look in first? Are these documents from 1983 important? Are any of these old bank or retirement statements linked to existing accounts? How can I access these accounts? How can I obtain the necessary consent to access the accounts if my parent is incapacitated or has passed? 

Fortunately, there are many solutions that, if properly executed, can help to avoid these unimaginable and almost impossible scenarios. As Mr. Power describes, the Power of Attorney (POA) can be a significant and essential tool. There are many types of POAs out there that can accommodate different situations. For example, a living parent who is still competent and wants to control his or her finances, but still would like his or her adult child to have limited powers to pay bills, sign lease agreements, etc. could create a limited power of attorney that would expire at either a certain age or specific event. A more general power of attorney would provide the adult child with greater authority to do things such as access bank accounts, buy and sell investment stock and real estate, conduct business transactions, etc. The Durable Power of Attorney remains in effect even when the parent is incapacitated and can no longer make financial decisions for him/herself. 

Although the POA is a significant tool and can make it much easier to control an incapable parent’s assets, there are a few risks and challenges to be aware of.  For one, as much as we would like to think that children will always look after their parents’ best interests, that is not always the case. Some children might take advantage of their newly discovered powers to deplete their parents’ assets for their own benefit. For this reason, many banks or other financial institutions, as Mr. Power pointed out, will decline a POA form that is not their own for fear of liability in case any undue influence or unethical behavior is at play. If a parent is incapacitated, obtaining a newly executed POA might be impossible. Second, although a POA would likely resolve the issue of accessing accounts, that is only half the story. As Mr. Power’s situation described, much of the stress and headache comes from actually finding the accounts, filtering through hundreds of unfamiliar documents, and trying to piece together a financial life of over 50 years that one was not a part of. A POA cannot help with this piece of the puzzle. Third, a POA will only be effective while the parent is alive. Once the parent passes, the POA becomes ineffective and the struggle to access accounts and other assets under the parent’s name resumes and becomes more difficult, and in some cases, even impossible.

One important solution not discussed in the WSJ article is the significance of a proper and complete estate plan. The most important piece of an estate plan is the revocable living trust. Unlike a will which only speaks once someone dies, or a POA which is only effective when someone is alive, a living trust accommodates the trustmaker’s wishes both while they are still alive as well as after they pass. A properly drafted revocable living trust allows for an individual, such as a spouse or adult child, to act as trustee in the case of the trustmaker’s incapacity. That same individual or a different individual can also act as trustee upon the trustmaker’s death. Financial institutions must honor the trustee’s powers as described in a trust just as they would a POA. The difference is that most trusts are drafted by attorneys and provide elaborate language that would not only describe a trustee’s powers, but also accommodate the trustmaker’s wishes when it comes to creditor protection, tax savings, asset distribution to children, protection of assets for a surviving spouse or children from a previous marriage, and so on. Because of its elaborate and comprehensive nature, banks will honor a trust document more freely than a POA and will not ask for its own forms to be completed.  Furthermore, a trust that is properly funded can help identify and centralize all of ones accounts that a trustee should be aware of and have access to.

Most importantly, a trust is something that everyone can and should have in their estate plan (in addition to a power of attorney, advance health care directive, pour-over will, and certificate of trust to name a few other pieces). If properly executed and funded, the revocable living trust would eliminate the type of scenario experienced by Mr. Power and his wife, and many other people as they struggle to deal with incapacitated parents. 

Sadly, many of us will find ourselves in the situation described above. However, with the right planning in place through an experienced estate planning attorney, one can plan ahead in order to save their loved ones from an unbearable struggle in the future. 

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