Federal Estate Tax: Big Bill Brings Relief and Clarity

Federal estate tax rules have long been a moving target—especially when new legislation hits. If you’re concerned about how much of your estate may be taxed, it’s important to understand the current landscape and how the One Big Beautiful Bill (OBBB) reshapes the picture starting in 2026.

Current Federal Estate Tax (2025)

As of 2025, the federal estate tax exemption is set at $13.99 million per person, or about $28 million for married couples using portability (source: Forty W Advisors, Sikich). Estates exceeding those limits are taxed at a top rate of 40%—but only on the portion above the exemption.

For example, a $20 million estate in 2025 could owe tax on approximately $6 million. Proper planning today helps avoid surprise liabilities later.

What Happens in 2026: The Big Beautiful Bill (OBBB)

Signed into law on July 4, 2025, the One Big Beautiful Bill brings significant and lasting changes to federal estate tax planning:

• Permanently raises the exemption to $15 million per person ($30 million for married couples) beginning January 1, 2026 (Bivens Law, Sikich)
• Indexes the exemption for inflation beginning in 2027 (Greenbush Financial Planning)
• Keeps the top federal estate tax rate at 40% for amounts exceeding the exemption

 Comparing Now vs. Later

Without the OBBB, the exemption was scheduled to drop to approximately $7 million per person in 2026. The new law not only prevents this drop but increases the exemption to a new permanent level, easing the burden for many high-net-worth individuals and families (sources: Evolution Tax & Legal, WSJ).

What This Means for You

• Higher Exemptions: Estates up to $15 million per person are shielded from federal estate tax starting in 2026.
• Timing Is Key: You can still use the current $13.99 million exemption in 2025—but the increased exemption applies beginning January 1, 2026.
• Rate Remains Unchanged: The 40% rate still applies for estates over the exemption level.
• Inflation Protection: The exemption will adjust annually to reflect rising costs.

Final Takeaway

The Big Beautiful Bill reshapes the federal estate tax environment for the better—offering certainty, higher exemptions, and more planning flexibility. This is a positive change for those with significant assets and family legacies to protect.

However, smart estate planning isn’t just about thresholds. Gifting strategies, trusts, charitable donations, and attention to state-level estate or inheritance taxes all play a role in your comprehensive plan.

TrustHandled makes it easy to adapt your documents to changing laws, store them securely, and ensure your plan evolves with your life and legacy.