THE $15M Permanent Exemption: What it Means for Your Plan

Our experience has shown that families often spend months debating whether they should make gifts before first asking which assets should actually be gifted. Under today’s estate tax rules, that distinction may be just as important as the decision to make the gift itself. For many families, selecting the right assets can have a greater long-term impact than simply maximizing the amount transferred.

For three years, estate planning had a deadline. The exemption was set to fall by roughly half at the end of 2025, and that cliff drove a great deal of activity — large gifts, made on a timeline nobody chose, into irrevocable structures families didn’t entirely love.

Then it didn’t happen. The One Big Beautiful Bill Act (OBBBA) set the exemption at $15M per person — $30M per couple — effective January 1, 2026, and struck the sunset. The relief is warranted. But the planning problem didn’t disappear. It moved.


WHAT CHANGED

• $15M per person, $30M per couple: indexed for inflation starting 2027.
• No sunset: though a future Congress can still lower it. “Permanent” means no expiration date, not immovable.
• 40% top rate, step-up at death, and portability all unchanged: but portability still requires filing an estate tax return, and GST exemption is still not portable.
  

THE REFRAME THAT MATTERS

Traditional planning said: get appreciating assets out of your estate to save 40%. That’s airtight if you owe estate tax. If you don’t, it inverts. Assets you own at death get a basis step-up; assets you gave away don’t. So, for a family under $30M, gifting a low-basis asset saves nothing in estate tax and costs the family capital gains tax on the whole embedded gain.

The decision rule: a 40% estate tax you would otherwise owe, against a 23.8% capital gains tax your heirs would otherwise avoid.

On $8M of stock with a $1M basis, a $25M family loses about $1.67M by gifting it. A $60M family gains about $1.53M. Same asset, opposite answer.

The practical upshot: asset selection inside a gift now matters as much as the size of the gift. If you’re above the exemption and gifting, it’s recommended to gift high-basis assets and cash, and keep the low-basis positions to die with.

THREE THINGS TO CHECK

• Gifts you made in 2024–25: Some remain excellent planning. Others solved a problem you no longer have. Many grantor trusts include a substitution power that lets you swap low-basis assets back into your estate without unwinding anything.
  
• Out-of-state real property: Florida has no estate tax, but about a dozen states plus DC do, at far lower thresholds. Massachusetts at $2M, Illinois at $4M, New York around $7.35M with a punishing cliff. New York taxes New York real property even when you die domiciled here. A Manhattan apartment or a New England summer house can generate real tax for a family that owes nothing federally.
  
• Life insurance bought to pay estate tax: If that liability is gone, the policy needs a fresh purpose. Your options range from reducing the death benefit to a 1035 exchange to a life settlement — but don’t lapse a large policy without valuing it first.


WHAT STILL MATTERS

Removing the estate tax from a plan doesn’t empty it. For families under the exemption, the biggest remaining tax issue is usually the SECURE Act’s ten-year rule on inherited retirement accounts. Then probate avoidance, incapacity planning, Florida’s homestead and creditor protections, shielding inheritances from divorce, beneficiary designations, and the non-tax questions — what the money is for, and who decides.

The bottom line: relief isn’t a plan. If your documents were drafted for a $7M-exemption world, the assumptions underneath them have changed. For most families, the planning energy should shift from estate tax to basis, state exposure, and retirement account taxation.


If this topic may affect your family, we’d be happy to review your plan alongside your CPA and estate planning attorney to determine whether any updates or planning opportunities should be considered.

Important Disclosure
This material is for informational purposes only and does not constitute tax, legal, or investment advice, or an offer or solicitation to buy or sell any security. Tax rates and rules change and vary by individual circumstance; state figures shown are illustrative estimates and should not be relied upon for planning. Certain of the information contained herein has been obtained from third-party sources and has not been independently verified. It is made available on an “as is” basis without warranty. Residency and domicile determinations are fact-specific. Consult your own tax and legal advisors before acting.