Each year the IRS announces inflation-adjusted updates to tax brackets, as well as modifications to exemption/exclusion amounts, to account for the ever-changing financial and political landscape within the United States. In 2025, the federal government passed the “One Big Beautiful Bill Act.” The Act significantly altered the potential impact of the federal estate tax on many Americans by making the federal exemption amounts permanent.
Here are the updated figures and considerations for 2026:
- Starting January 1, 2026, the federal lifetime gift, estate, and GST tax exemption amount will be $15,000,000 per person or $30,000,000 for a married couple.
- The annual exclusion amount will remain at $19,000 per recipient in 2026 ($38,000 for a married couple).
- High net worth individuals and couples who have already fully used their existing federal exemption amount based on the prior exemptions may want to look at additional gifting in 2026.
- In addition to outright gifting strategies, there may be options available to families through the direct payments for tuition/education or medical expenses, so long as those payments are made directly to the school or medical provider.
- A variety of planning techniques can be used to leverage the existing exemption and to shift future appreciation of assets outside of a taxable estate, such as ILITs (Irrevocable Life Insurance Trusts), SLATs (Spousal Lifetime Access Trusts), and irrevocable gift trusts for children and grandchildren.
It is important to note that the “One Big Beautiful Bill Act” eliminated the scheduled reduction in the exemption that was set to occur in 2026 under prior law. The exemption is now set at $15,000,000 per person, indexed for inflation beginning in 2027, with no automatic sunset. However, Congress retains the ability to amend these amounts in the future, so careful planning and monitoring of proposed law changes remains essential.
In addition to the federal gift and estate tax, Minnesota also has its own state-specific estate tax. Minnesota’s state-specific estate tax exemption remains at $3,000,000 per person (if proper planning is done). Minnesota’s estate tax exemption is not portable – meaning the unused portion of a deceased spouse’s $3,000,000 does not automatically transfer to the surviving spouse. The Minnesota estate tax exemption amount has not changed since 2020. Under current law, the Minnesota estate tax exemption is scheduled to remain at $3,000,000 until new legislation occurs. The Minnesota estate tax rates range between 13 and 16 percent depending upon how far above the exemption amount a person’s estate is. The bottom rate applies to taxable estates up to $7.1 million, and the top rate applies to the amount over $10.1 million with a sliding rate in between.
Please contact our attorneys in the Trusts & Estates Practice Group if you would like to evaluate and discuss gifting and tax strategies given the new exemption amounts and expected future changes.
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