The Estate Tax Sunset Is Off: What the Permanent $15 Million Exemption Means for Your Plan

When I first wrote this post in 2023, the big question for affluent families was the estate tax "sunset." The higher exemption from the 2017 Tax Cuts and Jobs Act was scheduled to be cut roughly in half after 2025. Many families were weighing large gifts before the deadline.

That sunset is now off.

In July 2025, Congress passed the One Big Beautiful Bill Act (OBBBA). It made the higher exemption permanent and raised it to $15 million per person for 2026 (CRS). Starting in 2027, the $15 million is indexed for inflation (Harter Secrest & Emery). The rush to "use it before you lose it" is over (Arnold & Porter).

Here's where things stand in 2026, and what I think it means for Houston families.

The 2026 numbers

• Estate and gift tax exemption: $15 million per person, or $30 million for a married couple (IRS).
• Tax rate above the exemption: 40% (CRS).
• Generation-skipping transfer (GST) tax exemption: also $15 million per person (McDermott Will & Schulte).
• Annual gift exclusion: $19,000 per recipient (IRS).
• Texas estate or inheritance tax: none. Texas repealed its inheritance tax in 2015 (SmartAsset).

"Permanent" means the exemption no longer has an expiration date. Congress can still change it in the future, as it can any tax law.

What this means for most Texas families

For most families, including many with substantial wealth, the federal estate tax is no longer a practical concern. That shifts the focus of estate planning from avoiding estate tax to three other questions.

1. Income tax basis matters more than estate tax

Assets you own at death generally receive a "step-up" in basis to their market value. Your heirs can then sell them without owing capital gains tax on the growth during your lifetime. Assets you give away during your life keep your original basis (CRS).

When the estate tax was a real risk, giving away appreciated assets early could still make sense. Now, for families well under $15 million or $30 million, holding highly appreciated stock, real estate or business interests until death often leaves heirs with a lower tax bill.

Texas is a community property state, which can make the step-up even more valuable. When one spouse dies, both halves of community property generally get a new basis, not just the half owned by the spouse who died (IRS).

2. Don't skip portability

Any exemption a spouse doesn't use at death can pass to the surviving spouse. But the surviving spouse has to claim it by filing an estate tax return (Form 706), even if no tax is due. The IRS allows up to five years after the date of death to make this election in many cases (IRS).

With the exemption now indexed for inflation, portability is inexpensive insurance for families who might approach the limit later. That includes business owners, families expecting an inheritance, and anyone whose assets could grow substantially.

3. Control, protection and family goals

Trusts were never only about estate tax. They can protect assets for a beneficiary who isn't ready to manage money, keep a family business together, provide for children from a prior marriage, and help avoid probate. Those reasons are unchanged.

Who should still plan for estate tax

The estate tax still matters if:

• Your combined estate is near or above $30 million, including life insurance death benefits, retirement accounts and business value.
• You own a fast-growing business or concentrated stock that could push your estate over the limit in 10 or 20 years.
• You live part-time in, or own property in, a state with its own estate or inheritance tax. Several states tax estates at much lower thresholds than the federal exemption.

For these families, the traditional tools still apply. They include lifetime gifts to trusts that grow outside the estate, allocating GST exemption to trusts for grandchildren, charitable strategies, and life insurance held in a trust to provide liquidity.

An estate plan checkup for 2026

If your plan was drafted or updated in anticipation of the sunset, it's worth a review:

• Formula clauses in older wills and trusts. Some older documents split assets based on "the maximum amount that can pass free of estate tax." With a $15 million exemption, that formula could send far more to a trust, and less to a surviving spouse, than you intended.
• Gifts made before the sunset. If you made large gifts in 2024 or 2025, confirm they were reported correctly and review whether the trusts that received them still fit your goals.
• Beneficiary designations. Retirement accounts and life insurance pass by beneficiary form, not by your will. Check them after any marriage, divorce, birth or death.
• Powers of attorney and health care directives. Make sure the people you've named are still the right choices.

How we help

At Mercer Street, we work with your estate planning attorney to coordinate your plan with your tax and financial picture. That includes projecting whether your estate could approach the exemption, identifying low-basis assets, and making sure beneficiary designations match your documents. We're hourly and fee-only, and we don't sell insurance or other products.

If you'd like a second look at your estate plan under the new rules, schedule a call.