🏛️ Family & Education · Estate Planning

The $15M exemption is now permanent.

The One Big Beautiful Bill Act made the lifetime gift and estate exemption permanent at $15M per person ($30M per married couple) for 2026, indexed for inflation from 2027. The old TCJA sunset was repealed. For high-net-worth families, the planning window no longer has a cliff — but the leverage of moving appreciation out of the estate is as powerful as ever.

$15M 2026 lifetime exemption (per person) $30M per married couple 40% federal estate / gift tax rate $19K annual gift exclusion (2026)

The 60-second pitch

Three numbers to know if your family's net worth exceeds ~$10M:

$19,000. The 2026 annual gift exclusion under IRC §2503(b) — each donor can give each donee that much per year without filing a Form 709 or touching the lifetime exemption. A couple with three kids can move $19K × 2 spouses × 3 kids = $114,000 every year out of the estate without any paperwork at all. A 20-year run = $2.28M moved tax-free.

$15,000,000. The 2026 lifetime gift / estate exemption under §2010(c). Each person can give away — during life or at death — up to this amount before the 40% federal estate / gift tax kicks in. A married couple combined: $30M. This is the giant lever, and under OBBBA it is now permanent.

$15,000,000. The 2026 GST exemption under §2631(c). Equal to the lifetime exemption. This is what lets dollars skip a generation — go straight from grandparent to grandchild — without paying the generation-skipping transfer tax at 40% on top of the gift tax.

The One Big Beautiful Bill Act (signed July 4, 2025) made all three permanent at $15M per person and indexes them for inflation starting in 2027. The old TCJA sunset that would have cut the exemption roughly in half on January 1, 2026 was repealed — there is no longer a cliff. The planning value now comes from freezing appreciation outside your estate, not from racing a deadline.

The IRS issued anti-clawback regulations in T.D. 9884 (2019) confirming: gifts made under the higher exemption will not be retroactively taxed if the exemption ever drops. In plain English: gifts you make today are locked in. That's the entire pitch.

Real-world example

Robert & Helen · $30M net worth · Two children · Four grandchildren · IL

The setup. Robert (74) and Helen (71) have a combined $40M estate, two adult children, and four grandchildren ages 6–17. Their goal: move as much as possible out of the taxable estate while keeping enough liquidity for their own retirement and healthcare needs.

The annual gifts (already happening). Each year they give $19K × 2 donors × 4 grandchildren = $152,000 via 529 plans and custodial accounts. Plus $19K × 2 × 2 children = $76,000 direct to kids. Total annual: $228,000/yr moved out tax-free under §2503(b), no Form 709 required.

The big move. Robert and Helen establish a dynasty trust in South Dakota (perpetual trust state). They fund it with $5M of Helen's marketable securities. They each use $2.5M of lifetime exemption (using gift-splitting under §2513 on Form 709). They also allocate $2.5M each of GST exemption to the trust via Schedule D of Form 709, so the dynasty trust's future distributions to grandchildren and beyond skip transfer tax for generations.

The math. If they do nothing: at death, $40M estate − $30M (their combined exemption) = $10M taxable × 40% = $4.0M of estate tax. By gifting $5M now: future estate is $35M − $30M of remaining exemption = $5M × 40% = $2.0M of estate tax. Plus all future appreciation of the $5M trust escapes their estate entirely.

The leverage. The $5M in the dynasty trust, invested at 6% over 20 years, grows to ~$16M — all outside the estate. $2M of federal estate tax saved immediately, plus ~$4.4M of tax saved on the trust's appreciation. Total long-term family wealth preservation: $6M+.

Other lever — GST direct to grandkids. If instead they want a simpler move: Robert gifts $5M directly to a generation-skipping trust for the grandchildren, allocating GST exemption on Form 709 Schedule D. Future distributions to grandkids and great-grandkids avoid the 40% GST tax that would otherwise apply.

2025 estate-tax savings locked in

~$2.0M

Plus future appreciation outside estate (20yr, 6%)

~$4.4M

The step-by-step checklist

Run an estate balance sheet. List every asset at fair market value: house, brokerage, retirement accounts, business equity, life insurance death benefit, collectibles. Compare to the combined exemption ($30M MFJ in 2026). If your total estate exceeds the combined exemption, this strategy applies.
Plan the trust drafting timeline. Trust documents take 60–90 days to draft, fund, and transfer assets. There is no longer a year-end cliff, but earlier funding moves more appreciation out of your estate sooner.
Use the annual exclusion first. $19K per donor per donee in 2026. 529 super-funding (5-year averaging) on Form 709 lets each spouse drop $95K per beneficiary per kid. A couple with 3 kids: $570K in one year. No bite into lifetime exemption.
Elect gift-splitting on Form 709. Under §2513, married couples can treat any gift made by either spouse as made one-half by each. Both spouses must consent on the same Form 709. This effectively doubles the per-spouse exemption coverage for couple-level gifts.
Allocate GST exemption deliberately. §2631(a) gives each individual the same dollar amount of GST exemption as the lifetime gift exemption. But it's not automatic — you must affirmatively allocate it on Form 709 Schedule D. Missed allocations result in default allocations that may waste exemption.
Choose the right trust state. Dynasty trusts require a state that allows perpetual or near-perpetual trust duration (Rule Against Perpetuities abolished). South Dakota, Delaware, Nevada, Alaska, Tennessee, New Hampshire, Wyoming. The trustee should sit in that state for jurisdictional purposes.
Consider asset selection. Gift assets expected to appreciate sharply (private company equity at a discount, growth-stock concentration). The appreciation occurs outside the estate. Cash gifts are simplest but waste the leverage.
Take valuation discounts where defensible. Family LLC interests, fractional real estate, restricted stock — IRS-recognized discounts for lack of marketability and lack of control can reduce the gift's reported value 20–35%. Requires a qualified appraiser; document everything.
Watch §2036 retained-interest pitfalls. If the donor retains control or beneficial enjoyment over a gifted asset (powers to alter beneficiaries, retained income, residence in a gifted home), §2036 yanks it back into the estate. Trust drafting must surrender control cleanly.
File Form 709 by April 15 the year after the gift. Required for any gift > annual exclusion, any gift-split election, any GST allocation. Extension via Form 8892. Statute of limitations only starts running when the gift is properly disclosed.
Document. Document. Document. Appraisals, transfer instruments, trust agreements, board minutes for LLC reorganizations, family bank records. The IRS audits estate tax returns for years to come — the paperwork is your shield.
Coordinate with state estate tax. 12 states + DC have their own estate tax with much lower exemptions (MA $2M, OR $1M, NY $7M, etc.). State doesn't always conform to federal exemption. Plan for both layers.

IRS code & authority

IRC §2010(c) Unified credit / lifetime exemption — $15M per person (2026), made permanent by OBBBA, indexed from 2027.
IRC §2503(b) Annual gift exclusion — $19K (2026), indexed for inflation.
IRC §2513 Gift splitting election — married couples treating a gift as half by each spouse.
IRC §2631 GST exemption — equal to the lifetime exemption.
IRC §2632 GST exemption allocation rules — automatic vs. affirmative.
IRC §2503(e) Direct tuition and medical payments exclusion — pay a grandchild's tuition or medical bill directly to the institution and it doesn't count as a gift at all.
IRC §2036 Retained-interest add-back — gifts pulled back into the estate if the donor retained control.
IRC §2032A Special-use valuation for family farms and closely-held businesses — reduces estate value by up to ~$1.4M.
T.D. 9884 Anti-clawback final regulations (2019) — confirms higher-exemption gifts won't be retroactively taxed if exemption drops.
Form 709 Gift (and GST) tax return.
Form 706 Estate tax return.
Tax Cuts and Jobs Act §11061 (2017) — the TCJA provision that doubled the exemption. Its scheduled January 1, 2026 sunset was repealed by OBBBA (P.L. 119-21), which set the exemption permanently at $15M per person.

Audit risk flags

Valuation overreach. Aggressive valuation discounts (40%+) on family LLC interests draw IRS scrutiny. Estate of Strangi and similar cases voided gifts where the FLP lacked legitimate business purpose. Defense: Real business operations, real third-party transactions, defensible discount in the 20–30% range, qualified appraiser.
§2036 retained powers. Donor lives in gifted home rent-free → home back in estate. Donor remains trustee with broad discretion → trust assets back in estate. Defense: Surrender control. Pay fair rent if you live there. Use an independent trustee.
Failure to allocate GST exemption. The automatic allocation rules don't always work how you want them to. Mis-allocated exemption means future generation skips trigger 40% GST tax. Defense: Affirmatively allocate on Schedule D every gift to a "skip person" or GST trust.
Step transaction doctrine. Gifting cash → recipient buys parent's discounted LLC interest = collapsed into one transaction. Defense: Gap of months between steps, independent recipient decisions, documented purpose.
Adequate disclosure failures. Form 709 must "adequately disclose" the gift, including a description, valuation method, and any discounts. Inadequate disclosure means the statute of limitations never starts running. Defense: File a thoroughly documented 709 — appraisal attached, methodology stated.
State estate tax conformity miss. Federal exemption is $15M; New York's exemption is roughly $7M with a brutal "cliff." A gift planned only for federal can blow up a state estate. Defense: Map both federal and state layers.
Loss-of-step-up gotcha. Gifted appreciated assets keep the donor's basis (carryover). Heirs would have gotten a step-up to FMV at death under §1014. For low-basis assets, the income-tax cost of gifting can exceed the estate-tax savings. Defense: Gift high-basis or rapidly-appreciating assets; hold low-basis for step-up.

When NOT to do this

Combined net worth under $30M (MFJ). You're under the combined exemption, so there's no federal estate tax to avoid. Focus on annual exclusion gifts and 529 super-funding only.
You'll need the assets back. A completed gift is irrevocable. Don't gift retirement runway. Always retain liquidity for healthcare and lifestyle.
Low-basis assets you'll hold to death. Step-up under §1014 at death erases unrealized capital gains. Gifting forfeits this. For low-basis legacy assets, holding may beat gifting on after-tax math.
You expect to live another 30+ years and need investment income. The estate tax savings discount back to present value across decades; meanwhile, the income from gifted assets is gone forever.
Spouse won't sign. Gift-splitting requires both spouses' consent. Without it, you're using only your own exemption.
You can use §2503(e) "qualified transfers" instead. Paying tuition or medical bills directly to the institution for a grandchild or anyone doesn't count as a gift at all — no exemption used. For lower-net-worth families, this beats every other lever.

Move appreciation out of your estate with a plan.

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Disclaimer. Educational, not tax or legal advice. OBBBA (P.L. 119-21) made the $15M exemption permanent as of this writing; Congress could modify it in the future. Estate, gift, and GST planning is highly facts-specific and requires a qualified estate-planning attorney and tax professional — not software, and not this article.