The 2026 Estate Tax Sunset

What's actually changing

The 2017 TCJA roughly doubled the federal estate exemption. That doubling was always temporary — built to expire (sunset) at the end of 2025. Unless Congress passes new legislation, the exemption reverts to approximately half its current level.

• ·2025 exemption: $13.99M per person ($27.98M per married couple)
• ·Projected 2026 exemption: approximately $7M per person ($14M per married couple)
• ·Federal estate tax rate above exemption: 40%
• ·Lifetime gift tax exemption is unified with estate exemption — also dropping

Who this affects (and who it doesn't)

If your total net worth — home, retirement accounts, life insurance, business equity, taxable investments — is well under the projected $7M per-person exemption, this sunset doesn't directly affect your tax situation. But many families are closer to the line than they realize.

• ·Estate includes: home + retirement + investments + business value + life insurance (if owned by you) + receivables
• ·Married couples can combine exemptions but require proper planning (portability election, careful titling)
• ·Life insurance death benefits OWNED by the deceased are estate-taxable — irrevocable life insurance trusts (ILITs) avoid this
• ·Business owners often underestimate the value of their company stake in their estate

The planning window: use it or lose it

Here's the leverage: under current law, you can gift the FULL current exemption ($13.99M individual / $27.98M joint) before January 1, 2026, and the IRS has confirmed there will be no clawback. Gifts made under the higher exemption remain valid even after sunset.

• ·Direct gifts to family members — but the gifted assets leave your control
• ·Spousal Lifetime Access Trust (SLAT) — gift to a trust your spouse can access, removing assets from estate while retaining some indirect access
• ·Grantor Retained Annuity Trust (GRAT) — appropriate for rapidly appreciating assets
• ·Irrevocable Life Insurance Trust (ILIT) — gets life insurance proceeds out of the estate
• ·Charitable Remainder Trust (CRT) — combines charitable giving with income retention

Common mistakes families make in the planning window

• ·Waiting until November/December 2025 — proper planning takes 3-6 months to execute well
• ·Gifting assets that don't appreciate (cash) instead of high-growth assets (business stock, real estate)
• ·Failing to coordinate with the surviving spouse's portability election
• ·Not accounting for state estate taxes (Michigan has none, but other states do)
• ·DIY-ing a SLAT or ILIT — these require careful drafting; small errors can disqualify the structure

Is Congress going to extend it?

Maybe. As of mid-2026, no legislation has passed to extend the higher exemption. Multiple proposals are in discussion but face partisan disagreement. Planning under current sunset assumptions is the conservative path — if Congress acts to extend, you can adjust. If Congress doesn't act, you'll have already protected the higher exemption.

The Takeaway

If your household net worth is between $5M and $15M, the 2026 sunset is a real planning window. Coordinated work with an estate attorney + financial planner + CPA usually takes 3-6 months to execute well. Start the conversation now — the window doesn't extend if Congress doesn't act, and last-minute planning is rarely good planning.

Free estate planning review

If you're in the $5M-$15M range, we'll model your exposure under current and post-sunset rules and refer to a Michigan estate attorney for the right trust structures.

Educational content only. Not financial, tax, or legal advice. Always consult a licensed professional before acting on the information in this post.