2026 Estate Tax Changes

Remember the estate tax cliff everyone was racing to beat before the end of 2025? It’s gone. For 2026, the federal estate and gift tax exemption is $15,000,000 per person, made permanent and indexed for inflation starting in 2027. The sunset that had advisors pushing clients into rushed trusts disappeared.

The estate tax is the federal tax on what you pass at death above the exemption. For years the planning world braced for the exemption to roughly halve at the end of 2025. Instead it rose, and the urgency drained out of a lot of strategies that were sold on fear.

What actually changed

Three federal numbers for 2026:

• Estate and gift exemption: $15,000,000 per person, so $30,000,000 for a married couple.
• Annual gift exclusion: $19,000 per recipient, the amount you can give anyone without touching your lifetime exemption.
• Generation-skipping transfer exemption: $15,000,000 per person, matching the estate exemption.

If you set up an irrevocable structure in 2024 or 2025 purely to “use it before you lose it,” that premise is dead. The exemption didn’t fall. It climbed and stayed.

The trap that didn’t go away

Here’s what the federal headline hides. If you live in New York, the state estate tax is the one that’s coming for you, and it operates on a far smaller number.

For 2026, the New York exemption is about $7,350,000, less than half the federal figure. Worse, New York runs a cliff. Cross roughly 105% of the exemption, around $7,717,500, and you don’t just get taxed on the excess. The entire estate becomes taxable from the first dollar.

I’ve seen the math on that cliff. An estate a hair over the line can owe hundreds of thousands more than one a hair under it. A New York family worth $8 million can sit comfortably under the federal exemption, owe nothing to the IRS, and still get hammered by Albany.

What to do about it

The federal relief is real, so stop paying for solutions to a problem you no longer have. But if you’re a New York household between roughly $7 million and $8 million, the cliff is the live threat and it rewards planning. Charitable giving at death, lifetime gifts that shrink the taxable estate, and careful timing can pull you back under the edge.

While you’re reviewing the estate side, don’t forget what your heirs inherit on the asset side. The step-up in basis still wipes out unrealized capital gains at death, which changes whether you should gift an appreciated asset now or hold it to pass later. The bigger exemption makes holding for the step-up the better move more often than it used to be.

One more 2026 note worth flagging, separate from the estate tax. The new federal senior bonus deduction gives those 65 and up an extra deduction (commonly cited at $6,000 per eligible person for tax years 2025 through 2028), but it phases out as income rises and the exact phase-out math depends on your filing status and how many spouses qualify. Run your own numbers before you count on it.

The estate sunset scare is over at the federal level. For New York families, the planning never was about the IRS. It was always about the cliff at home. Start with the New York estate threshold and annual gifting limits, and build from there.