Lifetime Estate Tax Exemption: $15M Cap, Portability, and GST

The federal lifetime estate tax exemption for 2026 is $15 million per person, or $30 million for a married couple that uses portability.¹ Only the value of an estate above that number is taxed, and the top federal rate on the excess is 40 percent. The exemption is a single pool that covers both the gifts you make during life and the assets you leave at death, so anything you give away above the annual exclusion draws down the amount that will be shielded when you die.

The $15 Million Number Is Now Permanent

For most of the last decade, estate planners worked around a deadline. The Tax Cuts and Jobs Act of 2017 roughly doubled the exemption from about $5 million to over $11 million per person, but that increase was set to expire on December 31, 2025 and snap back to around $7 million.² That sunset never arrived. The One Big Beautiful Bill Act, signed on July 4, 2025 as Public Law 119-21, rewrote the baseline to $15 million and struck the sunset provision.³

Beginning in 2026, the $15 million figure is indexed for inflation using 2025 as the reference year, so it will climb each year with the cost of living.³ The IRS has confirmed $15 million as the basic exclusion amount for 2026.¹ Because the change is permanent rather than temporary, the “use it or lose it” pressure that dominated recent planning is gone for now. Congress can revisit the number in future legislation, but there is no scheduled reversion built into current law.

One Pool for Gifts and Estate

The exemption is not two separate benefits. Gifts you make during your lifetime and transfers at death draw from a single unified credit. Every dollar you give above the annual exclusion reduces, dollar for dollar, what remains available to shelter your estate. No tax is actually paid at the time of a large gift as long as you still have exemption left; the IRS simply tracks how much you have used through Form 709. At death, reported taxable gifts are added back to the remaining estate and the total is measured against the exemption to see whether any tax is owed.⁴

The gross estate that gets measured is broad. It includes real estate, bank and brokerage accounts, retirement accounts, business interests, vehicles, personal property, and life insurance proceeds if you retained any ownership rights in the policy. Everything is valued at fair market value on the date of death. Debts, funeral costs, administrative expenses, bequests to a citizen spouse, and gifts to qualified charities come off the top before the exemption is applied.⁵

Gifts That Don’t Touch the Exemption

You can give up to $19,000 per recipient in 2026 without using any of your lifetime exemption.¹ A married couple can give $38,000 per recipient by splitting the gift. Annual exclusion gifts require no gift tax return and never count against the $15 million. Only the portion of a gift exceeding $19,000 to a single person in a single year becomes a “taxable gift” that reduces your unified credit.

Two other categories fall outside the tally entirely. Tuition paid directly to an educational institution and medical expenses paid directly to a provider for someone else are excluded from the gift tax with no dollar cap.⁶ The word “directly” carries the rule. A check written to the university or the hospital qualifies. Reimbursing the student or the patient does not. These payments count against neither the annual exclusion nor the lifetime exemption.

Portability: Getting to $30 Million as a Couple

Portability lets a surviving spouse claim the unused portion of the first spouse’s exemption, bringing the couple’s combined shelter to $30 million for 2026.⁷ If the first spouse dies with a $4 million estate, the unused $11 million transfers to the survivor, who can then shield up to $26 million at their own death.

Portability is not automatic. The executor of the first spouse’s estate has to file Form 706 and affirmatively elect it, even when the estate is far too small to owe any tax.⁸ The regular deadline is nine months after death, with an automatic six-month extension available on Form 4768.⁹ Miss it and the unused exemption is gone.

There is a rescue route. Under Revenue Procedure 2022-32, an estate that was below the filing threshold and simply never filed can submit a properly prepared Form 706 within five years of death, noting on the return that it is filed under that procedure, with no user fee.⁸ Estates that were required to file and missed the deadline have no access to this relief and must request a private letter ruling, which is expensive and uncertain. One further limit: the unlimited marital deduction that makes portability so useful does not apply when the surviving spouse is not a U.S. citizen, and different rules using a qualified domestic trust take over instead.¹⁰

If You Already Gave Under the TCJA Exemption

Plenty of people made large gifts between 2018 and 2025 while the temporarily elevated exemption was in place. IRS regulations guarantee that the estate tax credit at death is calculated using whichever exemption amount is greater: the one in effect when the gifts were made or the one in effect at death.² With the permanent $15 million exemption now higher than any prior threshold and rising with inflation, this anti-clawback protection matters less than it did a year ago, but it still assures anyone who gifted under a prior year’s exemption that those gifts won’t generate additional estate tax after the fact.

The Generation-Skipping Transfer Tax Sits Alongside

Transfers to grandchildren or others two or more generations below you trigger a separate tax, the generation-skipping transfer tax, at a flat 40 percent rate on top of any regular estate or gift tax. The GST exemption matches the estate tax exemption at $15 million per person for 2026.¹¹ One important asymmetry: the GST exemption is not portable between spouses. Each spouse has to allocate their own $15 million independently.

State Taxes Follow Their Own Rules

The federal exemption is not the whole picture. About a dozen states and the District of Columbia impose their own estate taxes, often with far lower thresholds. Oregon starts taxing estates at $1 million and Massachusetts at $2 million. An estate that owes nothing federally can still face a real state tax bill.

Some states impose an inheritance tax instead, which the recipient pays rather than the estate. Rates and exemptions depend on how closely the beneficiary is related to the deceased, with close relatives typically paying less or nothing. Maryland imposes both. If you live in or own property in a state with its own transfer tax, planning around the federal $15 million alone can still leave your heirs with a bill.

When an Estate Tax Return Is Required

The executor must file Form 706 when the gross estate plus lifetime taxable gifts exceeds the filing threshold for the year of death, or when the estate is electing portability regardless of size.⁸ For 2026 deaths, the threshold is $15 million.¹

The return is due nine months after the date of death. Form 4768 buys an automatic six-month extension of the filing deadline, but not of the deadline for paying any tax owed; interest accrues on unpaid tax from the original due date.⁹ For a couple planning to preserve the full $30 million, the practical takeaway is simple: file the return at the first death even when no tax is due, because that is the only way the second spouse ends up with the combined exemption.

1
Internal Revenue Service. What’s New – Estate and Gift Tax
2
Internal Revenue Service. Estate and Gift Tax FAQs
3
Congress.gov. H.R.1 – 119th Congress – Text
4
Office of the Law Revision Counsel. 26 USC 2503 – Taxable Gifts
5
Internal Revenue Service. Estate Tax
6
Internal Revenue Service. Frequently Asked Questions on Gift Taxes
7
Office of the Law Revision Counsel. 26 U.S. Code 2010 – Unified Credit Against Estate Tax
8
Internal Revenue Service. Frequently Asked Questions on Estate Taxes
9
Internal Revenue Service. About Form 4768 – Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes
10
Office of the Law Revision Counsel. 26 USC 2056A – Qualified Domestic Trust
11
Office of the Law Revision Counsel. 26 USC 2631 – GST Exemption