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The President’s bill proposes to raise the federal estate tax exemption to $15 million per individual ($30 million per married couple) and make that change permanent. For those concerned about the future of the estate tax, this proposal may offer a degree of long-awaited certainty.

The Current Law (and the Looming Sunset)

Under the current law, the federal estate tax exemption stands at $13.99 million per person for 2025. However, this elevated amount—enacted initially as part of the 2017 Tax Cuts and Jobs Act (TCJA)—is set to expire at the end of 2025. If no legislative action is taken, the exemption will decrease by roughly half, reverting to approximately $7 million per person starting in 2026.

This “sunset” would dramatically expand the number of estates subject to the federal estate tax and potentially catch many families off guard. To illustrate the impact:

An individual with a $20 million estate who passes away this year (2025) would owe approximately $2.2 million in federal estate taxes, assuming no deductions for state estate taxes or charitable gifts.

If that same person were to die on or after January 1, 2026, under current law, their estate would owe an estimated $5.2 million in federal estate taxes. However, if the proposed legislation passes, raising the exemption to $15 million and making it permanent, their estate would owe approximately $2 million.

This stark contrast highlights the urgency and importance of proactive estate planning before the 2026 sunset, underscoring why this new bill could be a game-changer.

For high-net-worth individuals and families, this potential reversion has created a sense of urgency around gifting strategies, trust creation, and overall wealth transfer planning.

What the Proposed Legislation Would Do

If passed, the bill would:

• Permanently raise the federal estate, gift, and generation-skipping transfer (GST) tax exemptions to $15 million per person, adjusted annually for inflation.
• Keep the estate tax rate at 40%.
• Eliminate the uncertainty associated with the 2025 sunset provisions, enabling individuals and families to plan with greater confidence.

The bill’s supporters argue that it helps family-owned businesses and farms avoid forced sales to cover estate tax liabilities. Critics counter that the bill primarily benefits the wealthiest Americans, while adding over $200 billion to the federal deficit over the next ten years.

Why This Matters for Your Estate Plan

Even if your estate falls well below the proposed $15 million threshold, the news is still relevant. Here’s why:

• Planning is still essential: Estate taxes are just one part of a complete estate plan. Powers of attorney, living trusts, health care directives, and guardianship provisions remain critical for everyone.
• The law has not yet been passed: Until the bill becomes law, the risk of the exemption reverting in 2026 remains real. Clients considering large gifts or funding irrevocable trusts may still wish to act before the sunset.
• State estate taxes are unaffected: States like Oregon, Washington, and Massachusetts impose their own estate taxes with significantly lower exemptions. These must be considered separately in your planning.
• High-net-worth clients must remain proactive: Even if the $15 million exemption is locked in, assets can appreciate and push estates over the limit. Flexible trusts and portability planning can help mitigate future tax exposure.

What Should You Do Now?

For those with estates approaching or exceeding the current exemption—or anyone interested in preserving wealth across generations—now is the time to revisit your estate plan. While the proposed legislation offers a more generous and permanent exemption, it has not yet passed and remains subject to the uncertainties of Washington politics.

Meanwhile, foundational planning should never be delayed. Ensuring your documents are up to date and aligned with your current wishes is the most effective way to protect your family and legacy, regardless of how tax laws shift.

Considering a review of your estate plan in light of this news?
Botti & Morison remains committed to guiding California families through changes in the law. Schedule a consultation to ensure your plan is secure and effective.

Thanks for reading,
Christopher E. Botti, Esq., Certified Specialist in Estate Planning, Trust and Probate Law

This blog is for informational purposes only and does not constitute legal advice. Every situation is unique, and you should consult a qualified attorney for advice tailored to your specific circumstances.