After the TCJA: Estate Planning Under the Permanent $15 Million Exemption

What the TCJA Did

The Tax Cuts and Jobs Act (TCJA), Public Law 115-97, was signed into law on December 22, 2017. It was the broadest rewrite of the U.S. tax code in more than three decades, touching individual income tax rates, the corporate rate (cut from 35% to 21%), international taxation and — most important for this guide — the estate, gift and generation-skipping transfer (GST) taxes.

For estates of people dying, and gifts made, from 2018 through 2025, the TCJA doubled the base "basic exclusion amount" from $5 million to $10 million (both in 2011 dollars, adjusted for inflation each year). Because the law was passed through budget reconciliation, the increase was written as temporary: it was scheduled to expire after December 31, 2025, when the exemption would have fallen back to roughly half its level. For several years, that looming "sunset" drove much of the estate-planning advice published in the U.S. — including earlier versions of this guide.

That sunset never happened. On July 4, 2025, Congress enacted Public Law 119-21 — widely called the One Big Beautiful Bill Act (OBBBA) and referred to by the IRS as the Working Families Tax Cuts legislation — which replaced the temporary increase with a higher, open-ended exemption beginning in 2026.

This guide explains what changed and why it still matters for families considering a SLAT, ILIT, Dynasty Trust, GRAT or any other trust — including families whose estates are nowhere near the federal threshold.

The Estate & Gift Tax Exemption, Year by Year

The federal estate and gift taxes share a single, unified lifetime exemption (the "basic exclusion amount" under IRC § 2010(c)). Taxable lifetime gifts — gifts above the annual exclusion — use up part of it, and whatever remains shelters your estate at death. Here is how the per-person amount has moved, according to the IRS:

A few other 2026 figures that matter to almost every family:

• Annual gift exclusion: $19,000 per recipient in 2026 (unchanged from 2025). Gifts at or below this amount don't use any lifetime exemption and generally don't require a gift tax return.
• Gifts to a spouse who is not a U.S. citizen: up to $194,000 per year in 2026.
• Top estate, gift and GST tax rate: still 40% on amounts above the exemption.

What the 2025 Law (OBBBA) Changed

Section 70106 of Public Law 119-21 amended IRC § 2010(c)(3). The key estate-planning changes, effective for deaths and gifts after December 31, 2025:

• $15 million basic exclusion for 2026. The base amount is now written into the statute as $15,000,000 per person.
• Inflation indexing after 2026. Starting in 2027, the $15 million is adjusted for inflation using 2025 as the base year, rounded to the nearest $10,000.
• No sunset. The provision that would have reverted the exemption after 2025 was struck from the Code. The roughly $7 million reversion that many families planned around did not take effect.
• GST exemption follows. The GST exemption is tied by statute to the basic exclusion amount, so it is also $15 million per person in 2026.
• Rates unchanged. The top estate, gift and GST rate remains 40%.
• Individual income tax rates. The TCJA's individual rate structure (top rate 37%) was also made permanent, which matters for grantor trusts and for beneficiaries who receive trust distributions.

What "Permanent" Really Means

You will often see the new exemption described as "permanent." That is accurate in one narrow sense: the law no longer contains an expiration date. It is not a guarantee. Any future Congress can raise, lower or restructure the estate and gift tax with new legislation, and the estate tax exemption has changed many times over the past few decades.

For planning, the practical takeaways are:

• There is no current deadline forcing anyone to make large gifts by a particular date. Decisions can be made on the merits — family goals, cash-flow needs, asset protection, state taxes — rather than under time pressure.
• Families with estates well above $15 million (or $30 million for couples), or with fast-growing assets that could get there, still have reasons to move future appreciation out of their estates.
• Good plans are built to work under a range of possible future exemption levels, and should be reviewed every few years and after any major tax-law change.

The Anti-Clawback Rule Today

In 2019 the Treasury Department finalized the anti-clawback regulation, Treas. Reg. § 20.2010-1(c). It answered a question raised by the TCJA's temporary increase: if you used a large exemption on lifetime gifts and the exemption later went down, would those gifts be "clawed back" into your taxable estate at death?

In plain terms, the regulation says no: when the estate tax is computed, the exclusion amount used is the greater of the amount in effect at death or the amount that was actually applied to your taxable lifetime gifts. Gifts sheltered by a higher exemption are not penalized if the exemption later drops.

Because the 2026 exemption is higher than the 2025 amount, the rule was not triggered by the end of the TCJA period. Today its relevance is as protection against a possible future reduction by a later Congress. Two cautions:

• The protection depends on the regulation remaining in place and on any future legislation not overriding it.
• In 2022, the IRS proposed an exception that would deny anti-clawback protection for certain "includible gifts" — transfers that are pulled back into the estate anyway, such as gifts where the donor kept a life estate or other retained interest, or unpaid enforceable pledges. Check with your advisor on the current status of these rules before relying on them.

Generation-Skipping Transfer (GST) Tax Exemption

The GST tax is a separate 40% tax on transfers that "skip" a generation — for example, a gift or trust distribution from a grandparent to a grandchild. Without planning, it can apply in addition to estate or gift tax on the same transfer.

Because the GST exemption is tied to the basic exclusion amount, it is $15 million per person in 2026 and will be indexed for inflation after that. This is most relevant to Dynasty Trusts and other long-term trusts for grandchildren and later generations. Key points:

• GST exemption must be allocated to a trust — on a timely gift tax return (Form 709) or under the automatic allocation rules. Many advisors recommend an affirmative election so the trust's "inclusion ratio" is clear.
• Unlike the estate tax exemption, GST exemption is not portable between spouses. Unused GST exemption at the first spouse's death is lost unless it is used by that spouse's estate plan.

Why Planning Still Matters for Most Families

With a $15 million federal exemption, it is tempting to conclude that estate planning is only for the very wealthy. That is a mistake. Federal estate tax is only one of the problems a good plan solves — and for most families it is not the most important one.

State Estate & Inheritance Taxes

Twelve states and the District of Columbia impose their own estate tax, many with exemptions far below the federal level. Five states impose an inheritance tax, paid based on who receives the property (spouses are generally exempt; close relatives often pay less than unrelated heirs). Maryland has both. A family that will never owe a dollar of federal estate tax can still face a meaningful state bill. Figures below are for 2026 as compiled by the Tax Foundation; state laws change often, so confirm with your state's revenue department.

Recent changes worth knowing:

• Washington raised its exclusion from about $2.19 million to $3 million for deaths on or after July 1, 2025, and at the same time raised its top rate to 35%. In 2026 the legislature reversed the rate increase (ESB 6347, Chapter 209, Laws of 2026): for deaths on or after July 1, 2026, rates again run from 10% to a top rate of 20%, with the $3 million exclusion kept.
• Iowa fully repealed its inheritance tax for deaths in 2025 and later.
• Maryland changed how its inheritance tax treats intangible assets (such as stocks and investment accounts) of nonresident decedents, for deaths on or after July 1, 2026.
• Several states (including New York, Maine, Rhode Island, Connecticut and D.C.) adjust their exemptions each year; others, such as Oregon and Massachusetts, use a fixed amount.

State rules also differ on details that matter a great deal, such as whether lifetime gifts are added back, whether real estate in another state is taxed, and whether a surviving spouse can use the first spouse's unused state exemption (most states do not allow federal-style portability). In these states, married couples often still use a credit shelter (bypass) trust at the first death to preserve the state exemption.

Portability & the Form 706 Requirement

"Portability" lets a surviving spouse use the deceased spouse's unused federal exemption — the deceased spousal unused exclusion (DSUE) amount. It is how a married couple can shelter up to $30 million without complicated trusts. But it is not automatic:

• The executor must file a complete federal estate tax return (Form 706) and elect portability, even if no tax is owed. The normal deadline is nine months after death, plus any extension.
• If the estate was not otherwise required to file, Rev. Proc. 2022-32 lets the executor make a late election by filing on or before the fifth anniversary of the death, with a specific notation at the top of the return. After five years, relief generally requires a private letter ruling.
• The DSUE amount is fixed at the first death — it is not adjusted for inflation, and growth on the survivor's assets is not sheltered by it (a bypass trust can shelter growth).
• A survivor can only use the DSUE of their last deceased spouse, so remarriage can affect the plan.
• Portability does not apply to the GST exemption, and many state estate taxes don't recognize it.

Because the exemption could be reduced by a future Congress, many advisors recommend filing a portability return at the first spouse's death even when the combined estate is well below $30 million.

The Non-Tax Reasons to Plan

• Incapacity. A funded revocable trust, durable power of attorney and health-care directives let a trusted person manage your affairs if you can't, often without a court guardianship or conservatorship.
• Probate avoidance and privacy. Assets titled in a living trust generally pass without probate, which can be slow, public and costly — and owning real estate in more than one state can mean more than one probate.
• Asset protection. Properly drafted irrevocable trusts with spendthrift provisions can protect an inheritance from a beneficiary's creditors, lawsuits or divorce. Protection for your own assets is more limited and depends heavily on state law (see DAPTs).
• Special needs. Leaving money outright to someone who receives SSI or Medicaid can disqualify them (the SSI resource limit is $2,000 for an individual). A supplemental needs trust can preserve eligibility.
• Blended families. Trusts can provide for a surviving spouse for life while making sure children from a prior relationship ultimately inherit.
• Long-term care. For some families, Medicaid planning (subject to the federal 60-month look-back on transfers) is a bigger financial risk than estate tax; see MAPTs.
• Income-tax basis. For estates below the exemption, keeping appreciated assets in the taxable estate to get a step-up in basis at death is often worth more than removing them — see Step-Up in Basis.

2026 Trust & Estate Income Tax Brackets

Trusts and estates that keep their income (rather than distributing it) are taxed on very compressed brackets. In 2026 a trust reaches the top 37% rate at just $16,000 of taxable income. An unmarried individual doesn't reach 37% until taxable income exceeds $640,600 ($768,700 for married couples filing jointly).

In addition, the 3.8% Net Investment Income Tax applies to a trust's undistributed net investment income above the same $16,000 threshold. Practical implications:

• Grantor trusts (where the person who created the trust pays the income tax) are taxed at the grantor's individual rates instead. That is one reason SLATs, ILITs and GRATs are often set up as grantor trusts. The grantor's payment of the trust's tax also lets the trust grow without being reduced by income tax.
• Non-grantor trusts that accumulate income hit the top rates quickly, and may also owe state income tax depending on where the trust, trustee and beneficiaries are located.
• Distributions that carry out distributable net income (DNI) shift the tax to beneficiaries, who are often in lower brackets — a trade-off against the protection of keeping assets inside the trust.

Step-Up in Basis Considerations

Under IRC § 1014, assets included in a person's estate at death generally receive a new income tax basis equal to their fair market value at death — a "step-up" (or step-down). Heirs who sell soon after death owe little or no capital gains tax on appreciation that built up during the owner's lifetime. Neither the TCJA nor the 2025 law changed this rule.

With a $15 million exemption, the step-up has become a central planning consideration:

• Assets given away during life — including to an irrevocable trust that is outside your estate — generally keep your original (carryover) basis.
• Grantor trusts are no exception. In Rev. Rul. 2023-2, the IRS ruled that assets in an irrevocable grantor trust that are not included in the grantor's estate do not receive a step-up at the grantor's death.
• Assets kept in the estate get the step-up, and for most families the estate will be fully sheltered by the $15 million exemption anyway.
• Many grantor trusts include a power to substitute assets of equal value, which can let a grantor swap low-basis assets back into the estate (to get a step-up) in exchange for cash or high-basis assets. Whether and how to use it is a technical decision for your advisors.

Where Each Trust Fits in 2026

Without a sunset deadline, the question is no longer "how do we use the exemption before it disappears?" but "which tools fit this family's goals?" Here is how each major trust type fits the current law.

Spousal Lifetime Access Trusts (SLATs)

A SLAT is an irrevocable trust one spouse funds for the benefit of the other (and often children), removing the assets and their future growth from the donor's estate while keeping indirect access through the beneficiary spouse. With no sunset pressure, SLATs now make the most sense for couples whose estates are likely to exceed the combined exemption, or who want creditor protection for part of their wealth. Watch for divorce risk, the loss of indirect access if the beneficiary spouse dies first, the lost step-up described above, and the "reciprocal trust" problem if spouses create nearly identical trusts for each other.

Irrevocable Life Insurance Trusts (ILITs)

An ILIT owns life insurance so the death benefit is kept out of the insured's estate (a policy transferred into an ILIT generally must be held for three years to achieve this). Premiums are usually funded with annual-exclusion gifts using Crummey withdrawal notices ($19,000 per beneficiary in 2026). ILITs remain useful for estate-tax liquidity in large estates, but many families now use them for non-tax reasons: controlling how insurance proceeds are managed for young or vulnerable beneficiaries, protecting them from creditors, equalizing inheritances, and providing liquidity to pay state estate tax.

Dynasty Trusts

A Dynasty Trust is designed to last for many generations. With $15 million of GST exemption per person, a properly allocated trust can shelter that amount — and all future growth — from estate and GST tax at each generation, in states that allow long-lasting trusts (some, such as South Dakota, Nevada and Alaska, have abolished or greatly extended the rule against perpetuities). It is also a strong vehicle for creditor and divorce protection for descendants.

Grantor Retained Annuity Trusts (GRATs)

A GRAT pays the grantor an annuity for a set term and passes any growth above the IRS "hurdle" rate (the § 7520 rate) to heirs, often with little or no use of exemption. GRATs were never dependent on the sunset and remain useful for families who have already used their exemption or own assets expected to grow quickly. The § 7520 rate changes monthly (it was 5.6% for October 2026); higher rates make GRATs harder to "win," so check the current rate. If the grantor dies during the term, the trust assets are generally pulled back into the estate.

Other Trust Types

• QPRTs — Transfer a residence at a reduced gift tax value while you keep living there for a term. Higher § 7520 rates generally make QPRTs more favorable, but the home loses its step-up, so they fit best for estates above the exemption.
• DAPTs — Self-settled asset protection trusts are recognized in only some states; whether they also remove assets from your taxable estate depends on how they are drafted and on state law. Today they are used mainly for asset protection.
• Special Needs Trusts — Essential for a family member with a disability at any wealth level; the federal exemption is rarely the deciding factor.
• Spendthrift Trusts — Protect an inheritance from a beneficiary's creditors or poor decisions; useful regardless of estate size.
• MAPTs — Medicaid asset protection trusts are about long-term-care costs, not estate tax. Transfers are subject to the 60-month look-back, and state rules vary.
• Deferred Sales Trusts — An installment-sale structure aimed at spreading capital gains over time; it is complex, depends on careful execution, and should be reviewed by an independent tax advisor.

A Practical Checklist for 2026

1. Review your documents. Wills and trusts written around the expected sunset — or with formula clauses tied to the federal exemption — may now direct far more (or less) to a particular trust than you intended. Have an attorney review them.
2. Estimate your estate. Include life insurance death benefits, retirement accounts, real estate and business interests. Compare the total to the $15 million federal exemption and to your state's exemption, if your state has an estate or inheritance tax.
3. Check your used exemption. Prior gift tax returns (Form 709) show how much lifetime exemption you have already used.
4. Plan for portability. Make sure your spouse and executor know that a Form 706 may be needed at the first death to preserve unused exemption — and about the five-year relief under Rev. Proc. 2022-32 if the deadline was missed.
5. Revisit the step-up trade-off. For low-basis assets, compare estate tax savings (if any) with the capital gains your heirs could avoid through a step-up.
6. Cover the non-tax basics. Powers of attorney, health-care directives, beneficiary designations, guardianship for minor children, and funding your revocable trust.
7. Keep records organized. Trust agreements, gift tax returns, GST allocations, appraisals and Crummey notices should be easy for your trustee and successors to find.
8. Review periodically. Revisit the plan every few years and after any change in family circumstances, state of residence or tax law.

How Trust Wizard Helps

Trust Wizard is an organizer and educational tool. It is not a law firm, does not give legal or tax advice, and does not by itself create a valid trust. Your information stays on your device.

• Enlightenment Hub: Education modules on the estate tax exemption and on each of the 10 trust types covered in our guides.
• Document Wizard: Start from fill-in drafting templates — for SLATs, ILITs, Dynasty Trusts, GRATs, QPRTs and five other trust types, plus supporting documents such as a GST Exemption Allocation Statement and Form 709 Gift Tax Return Memo — as starting drafts for your attorney.
• Crummey Notice Generator: Produce a withdrawal-right notice letter for each beneficiary, using the current $19,000 annual exclusion.
• Compliance tracker: Built-in annual reminders for Crummey letters, trustee meetings and state entity/LLC fees.
• Document vault: Scan and store signed trust documents on your device.
• Successor File: Create an encrypted, passphrase-protected file that a successor trustee can open to see the trust's documents and any policies it owns.

Every template is a starting draft and must be reviewed by a licensed attorney in your state before anyone signs it. See all features.

Sources & Further Reading

• IRS — What's New: Estate and Gift Tax (basic exclusion amounts by year; 2026 change)
• 26 U.S.C. § 2010 — Unified credit, basic exclusion amount and portability (Cornell LII)
• IRS Rev. Proc. 2025-32 — 2026 inflation adjustments (exemption, annual exclusion, trust brackets)
• Treas. Reg. § 20.2010-1 — Anti-clawback rule (Cornell LII)
• Journal of Accountancy — IRS proposes exception to anti-clawback rule (2022)
• IRS Rev. Proc. 2022-32 — Five-year relief for late portability elections
• IRS Rev. Rul. 2023-2 — No basis step-up for grantor trust assets outside the estate
• Tax Foundation — Estate and Inheritance Taxes by State, 2026
• Washington Legislature — Final Bill Report, ESB 6347 (2026 estate tax changes)