Estate Planning 2026 Changes: What the New One Big Beautiful Bill Means for Trusts and Estates

At the start of 2025, estate planners and their clients were bracing for a dramatic shift. Under the rules then in place, the generous federal gift and estate tax exemptions were poised to expire at year’s end. Without legislative action, the lifetime exclusion – which allowed individuals to transfer $13.99 million (and couples nearly $28 million) free of federal estate tax – would have been cut almost in half on January 1, 2026. Families were scrambling to make large gifts, create irrevocable trusts, and otherwise “use it or lose it” before the clock ran out.

That urgency subsided on July 4, 2025, when Congress passed and the President signed the One Big Beautiful Bill Act (OBBBA). The Act permanently changed the landscape for estate, gift and generation‑skipping transfer (GST) taxes, granting wealthy individuals and families a level of certainty that has been missing for years. As we enter 2026, it’s worth exploring what these changes mean and why planning remains just as important as ever.

A New Baseline: Higher, Permanent Exemptions

The centerpiece of the OBBBA is a substantial increase in the federal lifetime estate and gift tax exemption. Beginning January 1, 2026, each individual can transfer up to $15 million free of federal estate and gift tax, with married couples effectively able to shelter $30 million by combining their exemptions. The law provides for annual inflation adjustments starting in 2027, ensuring that the exemption keeps pace with rising costs over time. Moreover, unlike the provisions enacted under the 2017 Tax Cuts and Jobs Act, these elevated exemptions do not come with a built‑in sunset. They will remain in force until Congress decides otherwise. At the same time, the top marginal tax rate on taxable transfers remains at 40 percent. Portability – the ability of a surviving spouse to inherit and use any unused portion of the deceased spouse’s exemption – continues for estate and gift taxes, though portability still does not apply to the GST exemption.

The GST exemption also now stands at $15 million per individual. This is significant for families who wish to set up “dynasty” or multi‑generational trusts, as it allows more wealth to pass to grandchildren and later generations without being eroded by transfer taxes at each generational level.

What Has Not Changed – and Why Planning Still Matters

By making the higher exemptions “permanent,” the OBBBA removes the immediate pressure to complete large gifts before an arbitrary deadline. However, permanence in tax policy is always relative: future Congresses can and often do revisit these rules. State‑level estate and inheritance taxes also continue to apply in many jurisdictions, with exemptions that may be far lower than the federal threshold. In 2026, for example, New York’s estate tax exclusion rises to $7.35 million per decedent; estates exceeding that amount by more than 5 percent are taxed on their full value. Other states impose no estate tax at all, while some, like Vermont and Oregon, have exemptions in the $5 million range. Therefore, even families who fall below the new federal limit may still owe state estate tax if they reside or hold property in states with lower thresholds.

The OBBBA also introduces changes to charitable giving incentives. Beginning in 2026, individuals who itemize deductions can claim charitable deductions only to the extent they exceed 0.5 percent of adjusted gross income (AGI). Donors in the top federal income tax bracket will receive tax savings computed at 35 percent, rather than 37 percent, for their charitable contributions. For those who do not itemize, a modest above‑the‑line deduction is available: single filers may deduct $1,000 ($2,000 for joint filers) in cash contributions made directly to charities, but gifts to donor‑advised funds and similar vehicles do not qualify. These changes create new planning considerations for philanthropically inclined individuals, particularly those who make smaller annual gifts or who tend to give in years when income is lower.

Revisiting Existing Trusts and Gifting Strategies

Many high‑net‑worth families spent 2024 and early 2025 setting up irrevocable trusts – such as spousal lifetime access trusts (SLATs), grantor retained annuity trusts (GRATs), and dynasty trusts – to lock in the then‑available $13.99 million exemption. The higher exemption does not render those efforts obsolete; rather, it offers an opportunity to add assets to existing structures or create new ones to capture the additional $1 million per person ($2 million per couple) now available. Those who exhausted their exemptions under the old rules may now have capacity for further tax‑free transfers. Given that market values and interest rates change over time, a new or restocked GRAT or SLAT established in 2026 could be particularly effective in removing future appreciation from the taxable estate.

Annual exclusion gifts remain a foundational tool. The OBBBA did not change the annual gift tax exclusion, which allows each taxpayer to give up to $19,000 per recipient in 2026 without reducing their lifetime exemption. By making consistent annual gifts to children, grandchildren, and other beneficiaries, individuals can gradually shift wealth while minimizing gift tax reporting. Combined with the elevated lifetime exemption, this creates a larger runway to reduce the size of one’s taxable estate over time.

Charitable Giving in the New Environment

With the charitable deduction floor and cap now in place, donors should consider how and when to give. Those who plan to give significant amounts may want to “bunch” donations into a single year to exceed the 0.5 percent AGI threshold and maximize itemized deductions. Alternatively, individuals might make larger contributions to charities in 2025 (when the old rules still applied) or in years when their AGI is unusually high. For non‑itemizers who routinely give to charity, the new $1,000 or $2,000 deduction offers a modest benefit, though it may not replace the value of deductions lost under the new floor.

Charitably minded individuals may also explore vehicles such as charitable remainder trusts (CRTs) and charitable lead trusts (CLTs), which can provide income to donors or heirs while ultimately benefiting charitable causes. These instruments continue to offer estate and income tax advantages, and may become more attractive if direct deductions become harder to obtain.

Looking Beyond Tax: Control, Protection and Flexibility

Even with a higher federal exemption, the core reasons for establishing trusts and comprehensive estate plans remain. Trusts allow grantors to control how and when beneficiaries receive assets, protecting young or vulnerable heirs from receiving large sums outright. They also safeguard assets from creditors, divorcing spouses and other threats, and can provide professional management for complex assets such as closely held businesses, real estate portfolios or digital property. Irrevocable life insurance trusts (ILITs) continue to play an important role in providing liquidity to pay estate taxes and equalize inheritances, particularly for families with illiquid assets.

The OBBBA’s changes to federal law do not alter the need to coordinate planning across multiple jurisdictions and family circumstances. Couples living in community property states, blended families and those with dual citizenship face unique challenges that require tailored solutions. Likewise, the explosion of digital assets – from cryptocurrency to online accounts and intellectual property – demands that estate planners address access, management and transfer of these assets in a world where property exists in the cloud as much as on paper.

Estate Planning 2026 Changes - Preparing for an Uncertain Future:

If history teaches anything, it is that tax laws evolve. While the OBBBA brings stability for now, political winds shift. An election or a change in fiscal priorities could prompt another overhaul. That is why estate planning should be viewed as an ongoing process rather than a one‑time exercise. Families who completed significant planning based on the previous sunset date should revisit their documents to ensure they take advantage of the larger exemption and align with the new charitable deduction rules. Those who delayed planning in anticipation of the sunset now have an opportunity to act without the pressure of a looming deadline.

Working with experienced estate planning attorneys, tax advisors and financial professionals remains essential. They can help model potential tax outcomes, evaluate state‑level exposure, and craft strategies that reflect both the current law and the possibility of future change. By staying informed and proactive, you can protect your legacy, provide for loved ones, and direct your wealth in a way that reflects your values long after 2026.