6 Essential Facts About Estate Tax Exemptions Sunsetting in 2026

The Sooner You’re Aware of the Facts, the Better. Here’s Why.

High stakes and dwindling time have put federal estate tax exemptions in the spotlight, making it an increasingly hot topic that legacy-minded individuals shouldn’t ignore. That’s because 2025 is fast approaching, and it’s set to be the last year for elevated estate tax exemptions. 

For many Texans, that could mean millions in available estate tax exemptions are no longer available as of 2026 — and that previous estate plans and strategies may no longer be as effective as they once were. For some, it may also result in new exposures and gut-wrenching estate taxes if key moves and updates aren’t made before 2026.

Elaborating on that, this helpful resource can walk you through the essentials of sunsetting estate tax exemptions, sharing more on:

Whenever it’s time for more information and personalized answers in a confidential setting, simply contact TAW Law Texas. 

2026 Federal Estate Tax Changes: 6 Crucial Facts

With 2025 right around the corner, there’s no better time than now to get up to speed with the consequential facts associated with the sunsetting estate tax exemptions. To that end, here are some facts you shouldn’t disregard if you’re intent on preserving as much as possible for your loved ones and beneficiaries, rather than estate tax bills.

Fact #1: Estate tax exemptions will drop by ~half as of 2026.

On Jan. 1, 2026, the federal estate tax exemption will revert to its pre-2018 levels, adjusted for inflation. That’s because current estate tax exemptions — which are $13.61 million per individual and $27.22 million for a married couple in 2024 — were established by the 2017 Tax Cuts and Jobs Act (TCJA). 

On day one of 2026, the TCJA expires, eliminating the higher estate tax exemptions it put into effect. With that:

• Individual estate tax exemptions are expected to go from ~$15 million in 2025 to ~$7 million in 2026.
• Estate tax exemptions for spouses are set to drop from ~$30 million per couple in 2025 to ~$14 million in 2026.

Takeaway: If you don’t know the value or scope of your estate, now’s the time to get a firm grip on these details. Understanding the nature of your estate is an integral first step to figuring out how the upcoming estate tax exemption changes may impact you.

Fact #2: Estate tax rates of up to 40% could apply to more Texas estates.

The value of an estate that exceeds the current exemptions can be subject to estate taxes, at varying rates that range from 18% (for remaining assets valued at up to $10,000) to as much as 40% (when the “remainder” is valued at $1,000,001 or more). 

In the real world, that means that the 40% estate tax rate could come into play for estates valued at: 

• $14.61 million or up for individuals or $28.22 million or more for married couples in 2024
• $8 million or more for an individual or $15 million and up for spouses as of 2026

As unnerving as these shifting liabilities may be, the silver lining could be that more individuals and families are thinking about, discussing, and focusing on estate planning before Dec. 31, 2025.

Takeaway: You may be able to leverage more (or more useful) estate tax mitigation strategies before 2026, rather than after. If your individual estate totals more than $7 million or your marital estate exceeds ~$15 million, you could be newly impacted by estate tax exemptions that previously never affected you.

Fact #3: Portability will be impacted.

Will portability go away in 2026? No is the answer to this common question about changing estate tax exemptions. 

Portability is a provision that allows a surviving spouse to use any unused portion of their deceased spouse’s federal estate tax exemption. So, if a husband passes away in 2024 and he has not used the full exemption, his wife could “port” the remaining exemption to increase her available exemption.

Although portability will not disappear when estate tax exemptions drop by roughly half in 2026, there will be less available to “port” in the event one spouse passes away without using the full exemption. It is extremely important to claim portability within the required time after a spouse dies, or you may lose the ability to take advantage of the current high exemption amount.

Takeaway: If you’re married or getting married before 2026, it’s prudent to talk about portability now while there may be better options for greater tax savings using this provision. 

Fact #4: Multiple strategies can insulate you from the impending changes IF they’re put in place before 2026.

Depending on your estate and your overall objectives, you may benefit from activating various devices and/or estate planning strategies before Dec. 25, 2026. In fact, some options for reducing the total value of an estate while setting up some estate tax mitigation measures include:

• Grantor Retained Annuity Trust (GRATs): GRATs typically own appreciating assets, letting the grantor (trust maker) draw annuity payments from the trust at an amount that’s usually equivalent to the initial value of the assets. The appreciation generally goes to the designated beneficiaries tax-free when the GRAT ends.
• Family Limited Partnerships (FLPs): FLPs can facilitate the management of family business interests and investments via general partnerships or limited partnerships, offering another avenue for removing assets from an estate to mitigate tax liabilities.
• Irrevocable Trusts: These trusts remove assets from a taxable estate and put them into a trust that cannot be altered once it’s up and running.
• Irrevocable Life Insurance Trusts (ILITs): ILITs can hold life insurance policies and payouts so that these assets do not contribute to a taxable estate.
• Intentionally Defective Grantor Trusts (IDGTs): IDGTs are designed with a “loophole” or “defect” that allows grantors to pay income taxes for the trust, even though the grantor does not technically own those assets (because the trust does).
• Spousal Lifetime Access Trusts (SLATs): SLATs provide a way for married couples to transfer certain assets to each other outside of a taxable estate and without the need for probate.
• Giving: Establishing a gifting strategy for charitable gifts and/or giving to loved ones now can be another viable way to reduce the value of an estate, get ahead of sunsetting estate tax exemptions, and achieve key estate planning objectives.

Takeaway: Your assets, needs, relationships, and goals can determine what may be better for you, and you’re not limited to one or a couple of strategies. Talking to a lawyer about how various strategies could advance your objectives can start to uncover more optimal options.

Fact #5: It’s prudent to review your estate plan at least once before 2026.

With estate tax exemptions set to change soon — and with life, business, assets, and relationships regularly in flux — revisiting and refreshing an estate plan before 2026 can help ensure it remains relevant, effective, and fully representative of your current wishes. 

For some, it may be best to review an estate plan at least a few times ahead of the sunsetting estate tax exemptions, especially if events like (but not limited to) the following happen between now and 2026:

• Marriage or divorce
• The death of a loved one or a birth in the family
• The acquisition or disposition of new real estate and/or major assets
• Starting a new business or exiting a self-started venture

Takeaway: Set up reminders or tasks for yourself to review your estate plan right before or at the start of 2025 and at least one other time, like halfway through the year. Prioritizing estate planning ahead of 2026 could save some millions or more in estate tax bills.

Fact #6: The laws could still change before 2026.

Although estate tax exemptions are on target to drop by ~50% in the near future, there’s still time for new laws to be passed ahead of 2026. If that happens, existing exemptions could remain in place or be altered in all-new ways, potentially disrupting your current plans.

As 2026 approaches, lawmakers will likely face mounting pressure to address the sunsetting TCJA and changing estate tax exemptions. Only time will tell if that’s sufficient for them to take action and somehow reset or reconfigure federal estate tax exemptions. 

Takeaway: Keep this issue on your radar over the next ~15 months. Consider consulting with an attorney when you need an update and it’s time to review your estate plan.

FAQs About Sunsetting Estate Tax Exemptions in 2026

Knowing the facts about the estate tax exemptions expiring in 2026 can open your eyes to novel opportunities for advancing your objectives in light of the latest changes to federal laws. Sometimes, the facts can raise follow-up questions and more concerns. To resolve those, here are some answers to common questions about the federal estate tax exemption and what’s happening to it in 2026.

What Is an Estate Tax Exemption?

The federal estate tax exemption is the upper limit of the value at which an estate can be passed on to heirs without incurring federal estate taxes. In other words, estate tax exemptions describe the portion of an estate not subject to estate taxes when an individual or married couple passes away and when certain parts of an estate are transferred to beneficiaries or heirs.

Higher estate tax exemptions mean more assets can be transferred to beneficiaries tax-free. As estate tax exemptions and the threshold for “exempt” property decline, the potential for estate tax liabilities can rise. That can make it even more important to have a viable estate tax mitigation plan in place.

Can My Will Alone Cover the Changing Estate Tax Exemptions?

It depends on your estate, the details of your will, and what you’re looking to accomplish with your estate plan. For more extensive, complex, or high-value estates, a will alone may not be enough to cover all of your bases and sufficiently protect your interests. In fact, you may benefit from establishing, funding, and administering one or more trusts now while possibly planning for others in your will.

The bottom line is this question is best answered by an estate planning lawyer at TAW Law Texas. Our attorneys can review your will and explain how it may serve you (or not) when estate tax exemptions soon change. We can also share helpful advice about how to revise a will, what devices you may want to consider setting up before 2026, and more. 

What Can Family Businesses Do to Get Ahead of Changing Estate Tax Exemptions?

The controlling partners of a family business can set up a family limited partnership (FLP) or a family limited liability company (FLLC) before 2026 to own, manage, and transfer business interests. With this, the leaders of family businesses may not just accomplish pivotal estate planning and estate tax mitigation objectives, but they can also put key pieces in place for business succession planning.

Does Portability Apply in Same-Sex Marriages & Civil Unions?

Yes, portability applies to both traditional and same-sex marriages. It does not, however, apply to the partners of civil unions or registered domestic partnerships. That’s according to the Internal Revenue Service (IRS), which also explains that it’s possible to request an extension for the time available to elect portability in some instances.

If I’m Concerned About Changing Estate Tax Exemptions, What Should I Do First?

First steps can include any or all of the following: 

1. Find the latest version of your estate plan and carefully review it.
2. Conduct a current evaluation of your estate, zeroing in on its exact value, so you know exactly what assets are contributing to your taxable estate.
3. Start to consider tax mitigation strategies and the available estate planning devices that are designed for your assets like yours while aligning with your bigger-picture objectives.
4. Book a free, confidential, no-obligation consultation with an experienced estate planning attorney in Austin, Texas, for personalized answers, support, and counsel.

How to Make Changes Ahead of 2026

Last-minute estate planning may leave you with fewer options, and none of us can turn back the clock once January 1, 2026, arrives. If you’re serious about getting ahead of sunsetting estate tax exemptions, don’t put off talking to a trusted estate planning lawyer at TAW Law Texas.

The sooner you consult with an experienced attorney, the more time you’ll have to get your ducks in a row and make critical updates to your estate plan, trust documents, and other devices. 

Email us or call 512-827-9212 to talk to a trusted
estate planning lawyer in Austin now.

As leading probate and estate planning attorneys in Austin, TAW Law Texas has a well-earned reputation for consistently providing exceptional counsel and value-focused solutions. 

We routinely represent individuals, businesses, family offices, and other parties throughout Travis County, Williamson County, Bastrop County, Blanco County, Hays County, and beyond. We are also dedicated to doing more for our clients whenever possible, which is why our probate law firm in Austin, Texas, provides premium probate services.

We invite you to check out our reviews to see what our clients have to say about us and what we may be able to do for you.

Todd A. Wilson

Todd A. Wilson has been practicing law since 2007, with the aim of educating all strata of society and sharing crucial insights about the importance of estate planning, probate, and more.

The Law Office of Todd A. Wilson (also known as TAW Law TX) offers affordable estate planning and probate services.

The post 6 Essential Facts About Estate Tax Exemptions Sunsetting in 2026 first appeared on Law Office of Todd A. Wilson.